Porsche, VW facing $2.3 billion claims for holding back information from shareholders

Article by Christian A., on January 9, 2012

Porsche and Volkswagen are faced with numerous claims, totaling to around EUR1.8 billion (around $2.3 billion), for supposedly holding back vital information from shareholders. The court said that one more lawsuit was filed against two German car companies, according to a spokeswoman for the court in Braunschweig, Germany. The extent of the damages weren’t divulged.

Porsche is accused of misleading investors about the number of shares in VW that it had at the time, resulting to a "short squeeze" that boosted VW shares. When Porsche announced that it controlled 74.1 percent of VW's voting stock in October 2008, the VW shares surpassed EUR1,000 apiece, with a more than a quadruple increase in a matter of days.

For a brief period, VW was the world's biggest company by market value. However, we all know that Porsche's attempt to take over its peer failed and backfired. Last year, Volkswagen had to delay a planned merger with Porsche Automobile Holding, the legal entity used in Porsche's takeover attempt of VW, in part due to the legal onslaught brought by investment funds.

Porsche had tried in vain but ultimately failed to acquire VW in the last decade. Porsche announced plans to acquire more than 20 percent of the VW Group in 2005. Then in 2006, the stake already reached around 30 percent. In 2007, Porsche reformed its company structure. The company became Porsche Automobil Holding SE (Porsche SE) and would serve as a holding company. It also formed a new company in the guise of Porsche AG, which took full charge of its operating activities, including its auto manufacturing operations.

In 2008, Porsche SE announced intentions to increase its stake in VW Group to 75 percent. By then Porsche SE had already owned 42.6 percent of VW shares and holds options to purchase another 31.5 percent.

No thanks to a global financial crisis that resulted to Porsche SE being cash-strapped, it became the subject of a reverse takeover from Volkswagen. In August 2009, Porsche SE and Volkswagen AG signed an agreement to merge their car making operations merge in 2011, thereby forming an "Integrated Automotive Group."

The management of Volkswagen AG agreed to Porsche SE retaining its 50.76 percent stake in Volkswagen AG. However, VW AG’s management would take a number management positions at Porsche SE, and VW AG would own Porsche AG.

Interestingly, even before Porsche became a part of the VW Group, the companies have always had a close relationship with each as the first Volkswagen Beetle was designed by Ferdinand Porsche, who was the founder of Dr. Ing. h. c. F. Porsche GmbH (1931).

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