One of the sweetest squeezes evah!
And one of closest-to-frivolous lawsuits the biz has seen in a while.
From our Oct. 29, 2008 post, "So how many hedgies did Porsche really kill?":
It was a classic corner. My first thought was Northern Pacific 1901 where the stock went from under $100 to $1000 during the squeeze. Although the VW squeeze was only half the magnitude it had the same effect, the speculators sell everything else as they desperately try to locate stock to cover. First up, the headline story from FT Alphaville:From DealBook:
Difficult to say, of course, but we’d be sellers of the €30bn figure being banded about by newspapers as they struggle to explain how speculators borrowed shares in Volkswagen, not knowing they belonged to Porsche, sold them, and then seemingly had to buy them back (from Porsche) at five times the price, before giving them to Porsche. (We won’t address the pref side of the trade!)>>>MORENext, some truly pathetic whining from the hedge funds via the Telegraph...
A New York state appeals court dismissed a lawsuit brought by hedge funds against Porsche on Thursday, handing the German automaker a big victory in the long-running legal battle over its controversial takeover of Volkswagen.
The Appellate Division decided that the hedge funds lacked jurisdiction to bring a lawsuit in a New York state court, ruling that there was an inadequate connections between New York and the facts of the case. The opinion reverses a trial court ruling this past summer that had upheld the action. The decision also mirrors a federal court ruling two years ago that bounced the hedge funds claim.
“The only alleged connections between the action and New York are the phone calls between plaintiffs in New York and a representative of defendant in German, and the e-mails sent to plaintiffs in New York but generally disseminated to parties elsewhere,” said the brief opinion. “We find that these connections failed to create a substantial nexus with New York, given that the events of the underlying transaction otherwise occurred entirely in a foreign jurisdiction.”
The litigation stems from historic “short squeeze” in the shares of Volkswagen in 2008. For years, hedge fund speculators had followed Porsche’s protracted attempt to gain control of Volkswagen.
Several dozen hedge funds had put a large bet in place that Volkswagen would decline in value because they thought Porsche had stopped buying Volkswagen stock. But in October 2008, when Porsche disclosed that it owned a 75 percent stake in Volkswagen, shares of Volkswagen spiked and the funds absorbed huge losses when they closed out their negative bet, or short positions.Porsche is not out of the woods, on December 19th the New York Times reported "2 Former Porsche Executives Charged With Market Manipulation":
The hedge funds — a group that included Elliot Associates, Viking Global Equities, and Glenview Capital Partners — accused Porsche of misleading investors about its stake in Volkswagen. They argued that Porsche should have disclosed its Volkswagen position much earlier than it did, and committed securities fraud by making deceptive public statements about the holding.
They first filed a lawsuit in federal court. A federal judge in Manhattan dismissed that case in December 2010, citing a 2010 United States Supreme Court ruling — Morrison v. National Australia Bank — that severely limited shareholders’ ability to sue a foreign company in the United States if that company’s shares traded on an overseas exchange. The hedge funds have appealed that decision to the federal appeals court....MORE
...The company’s former chief executive, Wendelin Wiedeking, was charged with making false public statements in 2008 about its plan to acquire Volkswagen.Also charged was Holger Härter, Porsche’s former chief financial officer, who was thought to be the mastermind of the takeover plan, which involved the use of complex financial derivatives....
And besides the hedge funds mentioned in the DealBook story there is another €2 billion lawsuit which Bloomberg reported in December 2011:
And shades of the Erie Wars, Cornelius Vanderbilt would have been pleased with the result....The investor group’s complaint alleges that “Porsche gained control over the price of VW common stock as it secretly built enormous derivative positions covering almost all of VW’s freely traded shares, then triggered a massive short squeeze, and finally released billions of euros worth of shares into the short squeeze for its own profit,” according to the statement....
As the NYT said back in 2008
...Porsche shares jumped as much as 43 percent to 65.98 euros midday in Frankfurt, the steepest gain since at least1996.The rise appears to have come from a short squeeze of historic proportions...