Payback is A Bitch: Hedgies To Sue Porsche For Billions
In a report to appear Monday, the German magazine Der Spiegel will write that “several law firms are compiling material for lawsuits to hold Porsche liable. They are working for hedge funds which had lost billions of Euros.” That’s news to Porsche CFO Holger Härter. He says he hasn’t heard of anybody who wants revenge or restitution. “I don’t even know who might have been hurt.” On Sunday, FAZ will publish an interview with Härter. First question: “When will the hedge fund called Porsche close its sheet metal factory?” Härter’s answer: “Our core business is and remains the automobile.” Everybody knows: not true. Porsche made more profits than sales in the last fiscal year. Of €8.6b in profits, only €1b were generated in that sheet metal factory. €7.6b were generated with derivatives. That was in the last fiscal year, which ended July 31. God, Härter and Wiedeking only know how much the Porsche hedge fund generated in the months thereafter, when the VW stock went wilder than girls at Mardi Gras. Härter now says they didn’t really mean it. Here is Härter’s version:
When Porsche started to think about taking an interest in Volkswagen, Härter says, they did the same any prudent businessman would do: hedge a little. Take out some insurance against, god forbid, a rising VW stock. At that time, the VW stock traded at around €30– pretty much the same level as it did for many, many years before. Shortly after Porsche innocently took out insurance, the VW stock started to inexplicably climb. It doubled in 2006. Doubled again in 2007. It shot up to over €1000 in October.
Praise the Lord for insurance! Härter claims he doesn’t like these high stock prices at all. “If the stock would have stayed at the old levels, we would have had to pay much less taxes than now.” Yes, profits can be such a bear when the taxman cometh. Everybody will have sympathy.
While lawyers are sorting their paperwork, Härter is already preparing his defense. Härter to the FAZ: “These accusations are totally without merit. We deny any responsibility. We observed the law. We duped nobody.” We’ll see how that plays in court.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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Tireguy: thank you for your informative posts! In particular, thanks for sharing the background information about the cash settled options, etc.
Porsche had long ago notified that they owned more than 30%. Any shortseller knew that Porsche could add further 20% without further need of notification. Further anyone knew that Lower Saxony owned further 20% and would not let go. Finally, since the takover of Contiental any serious trader knows that companies can also try to get options on shares through so called “Cash settled option”, where usually the banks secure against their risk by buying the stock themselves. This happened here for about 30% of VW stock. Consequence: the Hedgies just were stupid and greedy. Does this not ring a bell? If u're going to short anything u need to know first if thats a strong co. Porsche or any of these German co. got loads of cash, unlike the penny stocks of Vancouver exchange in its heyday. Just about anybody can have a co. U can make your dog secretary & CEO, a couple of beat up Buicks a wood desk listed as assets. Sollt these folks mistaken the Iceberg as a beautiful beach that u can go full tilt to land on the beach thats all.