Hedge funds may sue Porsche over VW
By Daniel Schäfer in Frankfurt and James Mackintosh in London
Published: March 15 2009 17:51 | Last updated: March 15 2009 17:51
Hedge funds are considering possible legal action against Porsche, the German carmaker, over its involvement in an extraordinary share price spike in Volkswagen that led to billions of dollars of losses for the funds.
Lawyers representing funds said they were working on a large number of cases, although they said many were still at an early stage and might never be filed. Hedge funds are gathering under the auspices of their trade body, the Alternative Investment Management Association (Aima), which last week began consulting members to assess the level of interest in “exploring what options might be open” over VW losses.
Aima declined to say what options it would consider. Hedge funds and wealthy investors were caught out last October by Porsche’s surprise announcement that it controlled 75 per cent of VW shares, much of it held indirectly. The subsequent scramble to cover their bets on the shares falling prompted a rise of more than 400 per cent in a few days, briefly making VW the world’s biggest company by market value.
A series of investors ranging from hedge funds to family offices is collecting material for possible damages claims against Porsche, lawyers said. “Up to 20 investors could eventually claim damage in several jurisdictions,” one adviser to those funds said. Other lawyers said more hedge funds were considering possible cases.
Porsche has always denied any wrongdoing. “We have always made sure that we comply with all legal regulations and we do not see a cause for lawsuits against us,” it said. Lawsuits, if brought, are unlikely to start before the summer, as investors would want to see what an expected ruling by Bafin, the German financial watchdog, said. Bafin is investigating possible market manipulation, although funds and their lawyers believe it would be unlikely to rule to Porsche’s disadvantage.
The share price spike led to widespread criticism by investors of German market rules, as Porsche used a form of options that do not have to be disclosed to build up its stake secretly. At the beginning of this year, Porsche raised its direct stake in Volkswagen to 50.76 per cent. The sports carmaker has said it aimed to lift its stake to 75 per cent if it was economically viable.
Some analysts have compared Porsche with a hedge fund after it made a profit of €6.8bn ($8.8bn) from VW option trades and about €1bn from selling sports cars in its last full fiscal year. Porsche denied this, saying it had always followed industrial logic.
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