A group of investment funds has filed a lawsuit against Porsche Automobil Holding and two of Porsche’s former executives, Wendelin Wiedeking and Holger Haerter, seeking to recover over USD1bn in losses suffered as Porsche attempted a takeover of Volkswagen in 2008.
The complaint, filed in federal court in Manhattan, explains in detail how Porsche manipulated the price of VW stock as it secretly accumulated control over almost all of VW’s freely traded shares, and then, after it achieved control, triggered a massive short squeeze.
Porsche released billions of euros worth of shares into the short squeeze for its own profit.
The complaint alleges that the defendants repeatedly misled investors and lied about Porsche’s positions and intentions with respect to VW in order to take control of VW while preventing the price of VW shares from rising to reflect their intentions.
The defendants’ actions enabled them to hide the extent to which Porsche had cornered the market in VW’s freely traded shares and simultaneously induced the plaintiff funds to establish short positions on the same shares.
On 26 October 2008, Porsche suddenly revealed the extent of its true control of VW shares. This resulted in what the New York Times called "a short squeeze of historic proportions." The Wall Street Journal reported that "[a]t the height of the short squeeze on Oct. 28, VW stock briefly topped 1,000 Euros, nearly five times as high as on Oct. 24, making VW the biggest company by stock-market value for a few hours."
The complaint alleges that the short squeeze forced the price of VW shares higher, allowing Porsche to make outrageous profits at the expense of the plaintiff funds.
"Porsche SE should be held accountable in a court of law," says Phil Beck, a lawyer for the funds. "We will do whatever it takes to make sure the rule of law is upheld."
Plaintiffs in the lawsuit are: Elliott Associates; Elliott International; The Liverpool Limited Partnership; Glenhill Capital; Glenhill Capital Overseas Master Fund; Glenhill Concentrated Fund; Glenview Capital Partners; Glenview Institutional Partners; Glenview Capital Master Fund; GCM Little Arbor Partners; GCM Little Arbor Institutional Partners; GCM Little Arbor Master Fund; GCM Opportunity Fund; Glenview Capital Opportunity Fund; Glenview Offshore Opportunity Master Fund; Perry Partners; and Perry Partners International.