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Lawsuit against Porsche gains momentum

The number of hedge funds suing family-controlled automaker Porsche for market manipulation and fraud in 2008 has risen to 35.

The plaintiffs released a joint statement yesterday stating 18 new hedge funds had joined the litigation against Porsche Automobile Holding SE and two former executives, Wendelin Wiedeking and Holger Haerter, accusing them of lying over their intentions towards Volkswagen. 

The lawsuit, which was first filed in New York by Elliott Associates, Glenhill Capital Management, Glenview Capital Management and Perry Capital in January, is seeking more then $2 billion in losses suffered. (Continue reading here)

The filing accuses Porsche and the two non-family executives of disguising their intentions to takeover the larger VW. "Less than a week before Porsche SE revealed the truth - that it had amassed control of more than 74% of VW's shares - it conducted phone calls with investment advisors in New York during which Porsche SE sought to reassure the New York-based investment advisors that it was nowhere near 75% control" the amended complaint, filed yesterday in New York, reads.

It goes on to explain in greater detail how the plaintiffs believe Porsche SE manipulated the price of VW stock while it complied more shares in VW. "Among the false statements Porsche SE made was that although it would acquire a simple majority of VW shares, "going to 75% is not on the agenda." Porsche SE told another fund that it would stop acquiring shares after achieving 50–55% control," the filing continues.

The funds go on to claim they lost more then $2 billion when the surprise announcement came in October 2008 that Porsche owned a 75% stake in VW, which is owned by a rival branch of the controlling Porsche family, and intended to make a takeover bid for VW. 

Porsche has yet to respond to the claims.

In a reversal of fortunes, Porsche's takeover bid failed and plunged the company into €10 billion of debt leaving the smaller carmaker, and its family head Wolfgang Porsche, needing VW's help to survive. (Continue reading here)

The two car companies are now in the middle of a complex merger that saw VW take a 49.9% stake in Porsche in October 2009. (Continue reading here) This move was the first step in the merger that is expected to be concluded by 2011.

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