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Porsche claims victory in lawsuit brought by funds

Porsche has won a key victory in its efforts to dismiss claims against the company for billions of euros of damages relating to its failed takeover of Volkswagen in 2008.

Porsche Automobil Holding SE said on Friday that Germany’s federal court of justice, the country’s highest civil court, had dismissed a claim for €1.2bn brought by 19 hedge funds.

When Porsche revealed in 2008 that it owned up to 74.1 per cent of VW’s shares, it caused a massive “short squeeze” in which hedge funds lost billions of euros.

Funds that had shorted VW’s equity, borrowing and then selling shares in the expectation of buying them back more cheaply later, were forced to unwind their positions amid a trading frenzy that caused the stock price to rocket.

Some 35 funds lost more than $20bn, said one lawyer involved in the litigation in March.

Porsche failed to secure control of VW in 2008. Instead, VW ended up buying Porsche’s sports car business and adding it to its stable of brands.

The claim for €1.2bn in damages was brought by hedge funds including Glenhill Capital, Greenlight Capital and Viking Global Equities.

The funds claimed that Porsche had engaged in market manipulation by building a large stake in VW and not disclosing its actions.

The civil claim was originally dismissed by Stuttgart district court in 2014.

The hedge funds appealed against the decision, but this legal action was thrown out by a more senior Stuttgart court last year.

A final appeal to the federal court of justice has now been dismissed, said Manfred Doss, a Porsche SE executive board member responsible for legal affairs.

He added that during Porsche’s acquisition of VW shares between 2005 and 2009, the sports car maker had always informed the capital markets correctly.

Lawyers representing the hedge funds did not respond to requests for comment.

The latest ruling in the civil cases brought against Porsche comes after two of its former executives were in March acquitted of criminal charges relating to market manipulation during the failed takeover of VW.

Prosecutors alleged that Wendelin Wiedeking and Holger Härter, Porsche’s former chief executive and finance director respectively, had intentionally tricked the market by secretly building the company’s stake in VW, while denying that they had any takeover plans.

But the two men denied the allegations, and were cleared of all charges by Stuttgart district court.

Porsche SE still faces civil claims for damages by other hedge funds, including Elliott International, of up to €5.5bn. These may be bundled together into a single claim, said one lawyer involved in the litigation.

Porsche SE is the holding company through which the Porsche and Piëch families own a majority of the voting shares in VW.

Via FT