Porsche wins hedge fund lawsuit

Frankfurt - Porsche won a key legal victory in its effort to end years of litigation stemming from a failed attempt to take full control of Volkswagen in 2008.

Germany’s highest civil court dismissed an appeal by 19 hedge funds including Viking Global Equities, Glenhill Capital and David Einhorn’s Greenlight Capital, Porsche Holding said Friday in a statement.

The investors were seeking around €1.2bn in damages from alleged market manipulation triggered by short-selling transactions, swaps and options related to VW voting stock.

Porsche Holding has faced a barrage of claims for a total of about €6.7bn since disclosing in October 2008 that it controlled 74.1% of Volkswagen, partly through options, and was seeking to acquire 75% as part of a takeover.

The announcement caused VW to soar as short sellers raced to cover bets that the stock would fall. While the Stuttgart, Germany-based Company’s effort ultimately failed, it still owns a majority of Volkswagen’s voting shares.

"This is the next important step for our company," Manfred Doess, Porsche Holding’s legal chief, said in the statement. "The still pending cases will confirm our legal position."

The Regional Court of Stuttgart had dismissed the action in 2014. The plaintiffs appealed but the Higher Regional Court of Stuttgart rejected their challenge in March last year. The Federal Court of Justice now also rejected their bid to overturn these rulings.

The decision by Germany’s highest civil court, which is final and can’t be appealed, is the seventh consecutive ruling that backs Porsche’s view that it properly informed investors, the company said.

Criminal acquittal

The ruling cuts the pending claims to about 5.5 billion euros and is a setback for investors still hoping for redress. Most suits are now being bundled in joint litigation pending at the Higher Regional Court in Celle, in VW’s home state of Lower Saxony.

That court centralised the evidence phase and has scheduled 22 days of hearings starting in July.

Porsche Holding has been seeking to overcome the allegations ever since its 2008 disclosure. German financial regulator Bafin initially reviewed the issue, and prosecutors raided the company in 2009.

Charges were brought in 2012, but a Stuttgart criminal court acquitted Porsche and two of its former executives in April this year. While prosecutors initially said they would appeal, they later abandoned the effort.