The New York State appeals court ruled in favor of Porsche Automobil Holding SE and dismissed a lawsuit filed by 26 hedge funds that claimed that the automaker caused over $1 billion of losses by cornering the market in Volkswagen AG shares. In a unanimous decision, the five-justice panel in Manhattan determined that Porsche had met its "heavy burden" to ascertain that the state was the wrong place in which to bring the lawsuit.
Porsche was accused by the hedge funds of creating a "massive short squeeze" in October 2008 by discreetly purchasing almost all of Volkswagen's freely traded ordinary shares in an attempt to take over the company, even when it publicly stated that it won’t do so. Upon Porsche’s unveiling of its holdings, VW’s shares increased. For a short time, VW became the world's biggest by market value.
This led to losses for hedge funds that had bet on a decline in the stock price. Porsche lawyer Robert Giuffra stated in an email that this decision is an "important victory."
Just last week, prosecutors in Porsche's hometown of Stuttgart disclosed that market manipulation charges will be filed against former Porsche CEO Wendelin Wiedeking and former Chief Financial Officer Holger Haerter linked with the VW share purchases. The defendants have always maintained that their clients didn’t commit any wrongdoing.