Porsche SE (PAH3) said hedge funds that accused the German carmaker of concealing a plan to corner the market in Volkswagen AG (VOW) shares agreed not to appeal a New York court ruling dismissing the case.
A New York state appeals court threw out the 2011 lawsuit in December, saying events at issue in the case had an “inadequate connection” to the state. Stuttgart-based Porsche had asked the appeals court in November to reverse a lower court’s rejection of its motion to dismiss the suit, brought by 26 hedge funds including David Einhorn’s Greenlight Capital Inc.
The hedge funds agreed to waive any appeal of the December ruling, while Porsche won’t raise any statute-of-limitations defense against claims the funds file before a court in Germany within 90 days, the carmaker said in a statement yesterday. Porsche said it still believes the claims are without merit.
“Every dismissal of a case is positive,” Frank Schwope, a Hanover-based analyst with Norddeutsche Landesbank Girozentrale, said by phone. “But there are other suits, also in Germany, which will probably go on for months, even years, and a settlement is one of the options to end the cases.”
Porsche rose as much as 3.4 percent, the biggest intraday jump since Jan. 11, and was trading up 2.5 percent at 65.71 euros at 9:30 a.m. in Frankfurt, valuing the company 20.1 billion euros ($27.4 billion).
Investors are probably reducing Porsche’s value by a “single-digit billion-euro” amount because of the risk they see of a court ruling against Porsche, Schwope said.
The hedge funds, which had bet that Volkswagen stock would fall, claimed Porsche misled investors by denying through much of 2008 that it intended to acquire the Wolfsburg, Germany-based carmaker and by using manipulative trades to hide its stock positions. The plaintiffs sought more than $1.4 billion in damages.
U.S. District Judge Harold Baer in New York in December 2010 dismissed a similar lawsuit by two hedge funds, Black Diamond Offshore (BDE:US) and Elliott Associates LP, representing a total of 39 U.S. and foreign-based funds.
In his opinion, Baer said he relied on a U.S. Supreme Court ruling that fraud claims such as those in the lawsuits against Porsche apply only to securities listed on domestic exchanges and domestic transactions in other securities. Baer said his ruling applied to similar complaints against Porsche.
The hedge funds appealed that ruling in January 2011, and subsequently filed the New York state court suit over the same allegations.
Porsche said on Oct. 26, 2008, that it controlled 74.1 percent of Volkswagen, partly through options, and was seeking an eventual takeover. The disclosures caused the shares to surge as short-sellers raced to cover their positions.
The failed bid led Porsche to agree to sell its sports-car business to Volkswagen as debt soared. That transaction was completed on Aug. 1, when VW bought the remaining shares in the maker of the 911 sports car for 4.5 billion euros.
The case is Viking Global Equities LP v. Porsche Automobil Holdings SE, 650435/2011, New York State Supreme Court, New York County (Manhattan).
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