• Oct 27th 2010 at 8:00AM
  • 18
Porsche spent billions in an effort to purchase as many Volkswagen shares as possible from 2006 to 2008. But eventually the luxury sports car maker's debt became so overwhelming that it was Volkswagen that ended up in position to snap up it's fellow German automaker. On the surface, that's the end of the story, but Viking Global Investors claims that the tale is a lot more complicated. Business Week reports that the New York-based investment company is suing Porsche for misleading investors to "believe that the VW shares were overvalued, inducing them to enter into short sales of VW shares." The fund lost $390 million in just two days, and short-sellers around the world reportedly lost $38 billion in the same time span.
Nearly $400 million is a lot of money, but it's only one of the short seller suits filed against Porsche. Back in January, several short sellers filed suit with similar claims, as the U.S.-based investors lost over $1 billion on VW short sales.

We aren't at all knowledgeable about the rules of short sales and we don't have any lawyers on the staff, but we can tell you that, at the very least, these lawsuits are likely a big-time hassle for Porsche. And if these suits ultimately bear fruit for the plaintiffs, Porsche could be a very costly problem for a car maker already short on cash.

[Source: Business Week]

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    • 1 Second Ago
      • 4 Years Ago
      Combine to create "Polkswagen" and be done with it.
        • 4 Years Ago
        There's too much "Volkswagen" in your variation. Porsche is the one with the money. It should be...Porschen.
      • 4 Years Ago
      from what i remember of the story what porsche/vw did was completely legal in german law so im sure this lawsuit will be very short lived

      screw the investment companies. they invested in shorts hoping the value of the shares would drop but instead they rose. the kind of vultures that invest in shorts so they can profit by guessing what companies will fail deserve everything they get
        • 4 Years Ago
        Short selling is risky as hell, to continue the gambling analogy it's like trying to hit a 5 way parlay. They knew the risks and they should stfu and learn from their mistakes.
        • 4 Years Ago
        STOCK MARKET...... legalized gambling PERIOD .
        My narrow minded understanding of the stock market was
        INVEST in a company and earn dividends .... Now it's hoping that the value
        of the stock goes up so I can sell at a profit ...screw the company
      • 4 Years Ago
      I am not in financing, I am an engineer. My understanding is that even though it may be legal in German law, seeing that the company is also traded under US markets makes means both companies must follow SEC regulations. I also think its true, for a company to be on our markets, also means that the company must have set up a US cooperation thus also confined under US federal law.

      Like I said, this is only an assumption, and I am not against putting to the investment groups even though many of our 401Ks are attached to the same people everyone hates. But if they companies are doing something illegal, I believe they are just a liable.
        • 4 Years Ago
        So, I looked at the great Wikipedia and it does say that VW is traded on the NYSE. For them to trade on US markets, the company must follow SEC regulations thus making them venerable to US lawsuits.

        Toyota is/was in the same case, for them it was about safety regulations.
        • 4 Years Ago
        Please excuse the typos, I am still on my first cup of coffee and its early. Plus I am an expert in numbers, not words.
        • 4 Years Ago
        I see what you're saying. Porsche does business here but it's through an American subsidiary. I'm definitely not a lawyer, but what jurasidiction does the SEC have to police two German companies if the shares were not purchased on an American exchange?

        If only I had someone to sue when I lost money in the stock market.
      • 4 Years Ago
      A hedge fund is whining that Porsche played the market better than they did. I'm having a hard time feeling any sympathy.
        • 4 Years Ago
        I understand that's the point of view most are taking on this but from reading the linked article it's more about they believe Porsche deliberitely and illegally manipulated the market. It's not "wah, I gambled and lost" type of thing though I'm sure they're not exactly about that either ;)
      • 4 Years Ago
      "to snap up it's fellow German automaker"

      It's ITS, not IT'S.

      Come on, Shunk... if you fancy yourself a writer, get the basics right.
      • 4 Years Ago
      misrepresentation or mistake as to subject matter i suppose?
      • 4 Years Ago
      Awww. Buncha a$$-hats lose their shirts betting on FAILURE instead of success. Short-selling in all its heinous forms should be illegal. Today's stock game is just that - a GAME. No better or worse than Vegas. The only kind of stock market model that would level the playing field for investors? Buy stock. Company does well = you make money. Company does poorly = you lose money. No outside jerk-offs (the "house" in Vegas) trying to "vig" the game. A message to the investment "community." Spare us the justification that shorting somehow "benefits the market." It's your version of "Heads I win, Tails you lose," and you know it.
      • 4 Years Ago
      The hedge funds and the short sellers suing Porsche need to go away. The short story is you bet against the market and you lost big time. A lawsuit may be a good way to regain some of your dignity, but what Porsche did was completely legal under German law so stop wasting everyones' time and money

      If the tables were turned and they had made $400 million in two days, how would they feel if Porsche came after them? The sense of entitlement some of these guys have is beyond my comprehension.

      The moral of this story is when you sell short, you open yourself up to unlimited downside, as some of these hedge funders experienced firsthand.
      • 4 Years Ago
      > that it was Volkswagen that ended up in position to snap up it's fellow German
      > automaker

      Right now VW AG owns 49% of Porsche AG. The rest is owned by Porsche SE which also happens to own 51% of VW AG. Porsche SE is controlled by the Porsche/Piech families.
      So all smoke and mirrors aside Porsche as well as VW are now under control of the Porsche/Piech clan. This likely didn't go exactly according to Wiedeking's plan, but I'm sure Piech wasn't too surprised how this played out. In any case, Mission accomplished.
      • 4 Years Ago
      Let's use this scenario: Google is trying to buy Apple. Steve Jobs spreads false rumor about the tanking of iPhone sales due to Android's success. Meanwhile he goes long Google and short Apple. Once he corners the market, he does a 360 about-face and causes the whole market to panic and get out at unfavorable prices. He cleans up, Google tanks, and he uses his loot to buy Google instead.
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