Will Hedge Fund Lawsuits Scupper The VW-Porsche Deal?
Generally speaking, official prospectus information tends to run on the alarmist side, warning investors of any and all possible problems, regardless of how likely they are to take place. Which is why you rarely see news organizations like Reuters pick up on prospectus warnings, like today’s story on a Volkswagen warning that its merger with Porsche could be scuttled by lawsuits filed by angry hedge funds. Porsche’s notorious “short squeeze” of hedge funds who were speculating on VW stock in the leadup to its planned takeover has drawn lawsuits in several countries which, according to VW’s recent capital increase prospectus, could:
place a considerable burden on Porsche’s financial resources and liquidity position, and if substantial in magnitude, could even lead to the insolvency of Porsche Automobil Holding SE…. The merger may not be possible at all, or may only be carried out at a later date, and the planned target structure of the integrated automotive company with Porsche may not be achieved or may only be achieved at a later point
With a billion bucks at stake in just one of those suits alone, VW’s warning is wildly appropriate. The only question remaining: do the hedgies have a shot at winning? Given that Porsche was commonly being called “a hedge fund that makes a few cars,” CFO Holge Härter’s defense that “we are not speculators—we never have been and will never want to be,” rings a bit hollow. Especially considering the Porsche shareholder meeting transcripts that have emerged. The saga continues…
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Always entertaining. When a non-insider pulls the same play as hedgies do, oh, the horrors. The horrors. It will be really interesting (in a scary way) if the hedgies get their way in the courts. Fortunately, it'll probably take 5 years for any of the cases to be heard.
I doubt the Porsche management did anything illegal, they had the blessing of the board who wouldn't risk the family company on that (atleast most of the family) the funds people made large bets and lost, they are trying to not be sued themselves. If anyone should be investigated it's Piech, he sat on Porsche's board approving of or fully aware of it's intentions, while as the chairman of VW, did everything possible to block and then take over the company he was denied in the 70's. I can't imagine a larger conflict of interest that could impact the market in a meaningful ways.
I don't see that Piech damaged VW or its owners. Piech damaged the short sellers. Parasites upon society. Below lawyers, in my estimation, if that were possible. Although some of my best friends are lawyers. I like idea of Porsche controlling VW. I like idea of VW controlling Porsche, but not as much.