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Porsche off the hook in one of its hedge fund lawsuits

By Tess De La Mare

A court in Stuttgart, Germany, has dismissed a lawsuit brought against Porsche SE – the investment company that controls the eponymous German carmaker – by a group of hedge funds seeking €1.4 billion in damages.

The hedge funds claimed Porsche mislead the markets back in 2008 over its takeover plans for rival German car brand Volkswagen.

The Piech and Porsche families, who are descendants of Ferdinand Porsche, the carmaker's founder, control Porsche SE.

Porsche initially denied it had any plans to take control of Volkswagen, but then later announced it owned or had positions on just under 75% of Volkswagen stock.

Many hedge funds had bet against Volkswagen shares – assuming they would fall in price, because there was no clear takeover bid from Porsche.

When Porsche revealed the size of its holding, there was a rush on Volkswagen shares as investors scrambled to buy them to cover their short positions, losing large sums. 

Judge Carola Wittig concluded Porsche had never definitively guaranteed that it would not try and takeover Volkswagen, and was therefore not liable for the hedge funds' losses under civil law.

She added the plaintiffs, among them Viking Global Investors and Glenhill Capital, had taken part in short selling, which is always risky.

Despite its recent victory, it is not the end of the litigation against Porsche – €5 billion-worth of lawsuits were brought against Porsche SE in the wake of the 2008 Volkswagen takeover bid, the majority of which have yet to be heard.