Porsche SE (PAH3) rose to the highest in almost two years after an appeals court ruled that New York state isn’t the proper location for hedge funds to sue the German carmaker over its stake strategy in buying Volkswagen AG. (VOW)
There’s an “inadequate connection” between New York and the events at issue in the case, with only e-mails and phone calls taking place there, the Appellate Division of the state’s Supreme Court said in a decision yesterday. Porsche jumped as much as 7.4 percent to 62.37 euros in Frankfurt trading, the highest price since Jan. 19, 2011.
Porsche asked the appeals court in November to reverse a lower court’s rejection of its motion to dismiss the 2011 suit by 26 hedge funds, including David Einhorn’s Greenlight Capital Inc. The funds, which had bet that Volkswagen stock would fall, claimed that Stuttgart, Germany-based Porsche misled investors by denying through much of 2008 that it intended to acquire Volkswagen, which is based in Wolfsburg, Germany, and by using manipulative trades to hide its stock positions.
“We find that these connections failed to create a substantial nexus with New York, given that the events of the underlying transaction otherwise occurred entirely in a foreign jurisdiction,” an appellate panel said.
The appeals court said witnesses and documents in the case are located in Germany, which provides an “adequate alternative forum.”
The plaintiffs sought more than $1 billion in damages. Porsche is also being sued in Europe over the issue.
“This is an important victory for Porsche,” said Robert Giuffra, an attorney for Porsche at Sullivan & Cromwell LLP, said in a statement. “The appeals court squarely held that these cases do not belong in a New York state court,”
James B. Heaton, an attorney for the plaintiffs, declined to comment about the decision.
Porsche was trading up 6.4 percent at 10:14 a.m., valuing the manufacturer of the 911 sports car and Cayenne sport-utility vehicle at 19 billion euros ($25 billion). Volume was 35 percent higher than the three-month daily average.
The carmaker 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.
Investors in Germany and the U.S. have claimed Porsche lied about its intentions to take over the carmaker. The failed bid led Porsche to agree to sell its sports-car business to Volkswagen, Europe’s largest carmaker, as debt soared. That transaction was completed on Aug. 1, when Volkswagen purchased 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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