Porsche and hedge funds agree to move case from New York to Germany

Article by Anita Panait, on February 1, 2013

Porsche Automobil Holding SE and several hedge funds seeking damages from the carmaker could now bring their case to courts in Germany, after agreeing Thursday that New York was the wrong venue to pursue compensation. Porsche SE remarked that it still believes that claims against it are without merit, but indicated legal problems connected to its failed takeover of Volkswagen are still far from over.

Porsche said in a statement that it has agreed not to raise any statute of limitations defense regarding claims filed by the hedge funds before a court in Germany within 90 days. The Appellate Division of the New York State Supreme Court held on December 27, 2012 that New York is not the right place for the case, but remained open to a possible appeal.

Porsche remains facing a $2-billion lawsuit in another case filed by other hedge funds in another court in the United States. In February and March 2011, 26 global hedge funds – including Glenhill Capital LP, David Einhorn's Greenlight Capital LP and Chase Coleman's Tiger Global LP -- filed for over $1.4 billion of damages from Porsche in the New York State Supreme Court, claiming that the carmaker committed fraud and unjust enrichment related to its transactions regarding Volkswagen shares in 2008.

The hedge funds claim that Porsche caused more than $1 billion in losses by cornering the market in VW shares during the failed takeover. They claimed that Porsche engineered a "massive short squeeze" in October 2008 by quietly buying almost all freely traded ordinary VW shares in a bid to take over the company, despite saying that it has no intentions to take a 75-percent stake.

When Porsche disclosed it already owns nearly 75 percent of VW, the latter’s shares jumped significantly, momentarily making the carmaker the largest company in the world in terms of market value. This surge caused significant losses for hedge funds that had gambled on a decline in VW’s stock price.

Topics: porsche

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