Hedgies Don't Throw In The Towel Yet, Appeal Porsche Decision
Porsche’s legal troubles aren’t over yet. A group of hedge funds appealed the dismissal of their $2 billion lawsuit against Porsche. The lawsuit had been thrown out by U.S. District Judge Harold Baer on December 31 for lack of jurisdiction.
The lawsuit had run afoul of an U.S. Supreme Court decision in Morrison v. National Australia Bank. America’s highest court had decided that U.S. courts are the wrong venue to complain about alleged securities fraud perpetrated in another country.
The plaintiffs had 30 days to make up their minds and filed notices of their appeal at the last minute in Manhattan federal court late on Friday, Reuters reports.
A few days ago, Volkswagen CFO Hans Dieter Poetsch saw a “high probability that the merger will be completed with Porsche, but we still have to remove some hurdles out of the way.”
He had already factored in the appeal. Asked if he expects the hedge funds to appeal the ruling, Poetsch answered “I think so, yes.”
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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I'm not a lawyer (nor do I play one on teevee), but the hedgies are a persistent lot, and given the global nature of securities trading, I suspect they'll find enough angles to keep the legal proceedings going until VW decides it's cheaper to pay them off to go away.
It was a pleasure to watch Porsche do to the hedge funds what they do to everyone else. I just wish Wiedeking had been wise enough to turn his paper profits into cold cash rather than go on an ego trip about VW.
for the Hedgies to win, they do have to prove its being manipulated, insider trading etc. Such a big co. u think they would play rules to backfire them later on? On what ground do they possess?
As I see it, the only way hedge funds could win against Porsche is if it's proved that Porsche itself was using some of the 35% of the VW shares it owned to play the market. If the hedge funds were borrowing their VW shares from the banks that had written the cash-settled options for VW, (and hedged themselves with the underlying) then there's no problem. However, there's no way Porsche could profit from the squeeze (as they apparently did) in this arrangement. The alternative is that Porsche was lending some of its 35% equity to hedge funds for them to short. Then, when the hedgies suddenly rushed to cover their positions after Porsche's announcement, Porsche sold back some of its shares at a massive profit while maintaining its equity holding (since it was taking both sides of the transaction). If this is what happened, then Porsche could be accused of manipulating markets (due to its transactions in the underlying shares during a publically announced takeover).