• Jan 28, 2010
The Porsche-as-hedge-fund escapade isn't fully resolved yet. Of course, the biggest denouement will be when Volkswagen finishes integrating the company early next year, but in the meantime, Porsche is still dealing with investor wrath after its stock market foray. A group of U.S.-based hedge funds is suing the Stuttgart carmaker for losses in excess of a billion dollars, claiming those losses came because Porsche misled them about its intent.

Porsche was coy about its stake in VW, and only disclosed its stock holdings in the company as required by German law. German law doesn't require a company to publicly declare cash-settled stock options as a share in the company. That means Porsche was sitting on shares it controlled that investors didn't know about, and investors read Porsche's statements on its intent as not having any interest in taking over VW. This, even though the company was knocking down doors all over Europe trying to get the VW law repealed...

When the extent of Porsche's holdings were found out, investors expecting VW's stock to drop had to cover their short positions buy buying a much smaller supply of stocks than expected, which drove VW's share price to intergalactic levels. And that's where the massive financial bloodletting happened. Porsche was already investigated and cleared by German authorities, who found that the company didn't break any disclosure laws. Redress in an American court, where the lawsuit was filed, could be just as difficult to come by.

[Source: Automotive News – sub. req'd | Image: Basheertome - C.C. License 2.0]


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