Porsche Automobil Holding SE won the dismissal of lawsuits from hedge funds seeking about €5.4bn ($5.3bn) in damages they say they incurred during Porsche’s failed takeover of Volkswagen AG more than a decade ago.
Institutional investors and private shareholders had pursued Porsche for compensation for losses they suffered in the trading of Volkswagen stock. German judges on Friday also rejected related suits against VW from investors who sought €2.3bn from the automaker because they say it failed to warn them about the alleged market manipulation.
“The claims can’t be granted under no legal aspect whatsoever,” Judge Matthias Wiese said in court.
The ruling goes back to the tumultuous episode of Porsche trying to buy much larger VW in 2008, only for the plan to falter and Volkswagen turning the tables to take over the sportscar-maker instead. In a move that triggered mayhem among VW investors, Porsche disclosed on October 26, 2008 that it controlled 74.1% of the German carmaking giant, partly through options, and was seeking a takeover - a plan the sportscar-maker had previously denied.
Porsche’s communication about its intentions in 2008 weren’t “grossly wrong or grossly misleading” enough to allow any claims here, according to the judge. The company had earlier said that it considered acquiring “more than 50%,” a wording that well left the door open for 75% or more, he said.
“For Porsche SE this is an important milestone victory,” a company spokesperson said welcoming the decision.
Lead plaintiff lawyer Axel Wegner called the ruling “no surprise” as the court had positioned itself this way right from the start of “these bizarre proceedings.” He’s considering an appeal.
Josef Broich, the lawyer for Elliott International LP, another of the plaintiffs, said his clients were also likely to appeal
“The court has shown that it has misunderstood central functions of the capital markets,” said Broich.
The Porsche release in October 2008 release prompted short sellers to cover their positions and drove up the price of VW shares, briefly making it the most valuable listed company on the planet. Wendelin Wiedeking, Porsche’s former chief executive officer, and ex-chief financial officer Holger Haerter were acquitted in 2016 of market-manipulation charges over the failed attempt to swallow VW.
Porsche Automobil Holding SE jumped as much as 5.7% after the ruling.
“Porsche SE (PSE) family holding company’s 37% NAV discount to market cap could narrow now that a German court has finally dismissed a €5.4bn lawsuit against it relating to market manipulation from a failed takeover of VW in 2008, though we wouldn’t rule out an appeal to the ruling,” says Michael Dean, BI automotive analyst.
The allegations date to when Porsche sought to acquire VW, a plan that was stymied by the global financial crisis because banks refused to bankroll the audacious foray. To save Porsche from bankruptcy, Volkswagen stepped in, buying the smaller company in stages until 2012 and leaving a publicly-traded holding company, whose main asset is the VW shares that Porsche accumulated. The Porsche brand returned as a publicly-listed company yesterday in an initial public offering. The sports-car maker ended its trading debut at €82.50 on Thursday, settling at the top end of VW’s initial range that valued the asset at €75bn.
Friday’s decision was largely expected given the judges had signalled five years ago they were ready to throw out the suit. The plaintiffs responded by filing more than two dozen claims to have them removed from the case, alleging they were biased.
While all of those claims were rejected, resolving them - combined with Covid pandemic delays - postponed the ruling until yesterday.
Signage for Porsche inside the Frankfurt Stock Exchange. Porsche won the dismissal of lawsuits from hedge funds seeking about $5.3bn in damages they say they incurred during Porsche’s failed takeover of Volkswagen more than a decade ago.