Black Diamond Offshore and Elliott Associates LP, claiming Porsche Automobil Holding SE cost hedge funds more than $2 billion by misleading short-sellers in its acquisition of Volkswagen AG shares in 2008, appealed a judge’s ruling dismissing their lawsuits against the sports-car maker.
U.S. District Judge Harold Baer in Manhattan Dec. 30 dismissed complaints by the two hedge funds, representing a total of 39 U.S. and foreign-based funds. The suits accused Stuttgart, Germany-based Porsche of secretly cornering the market in Volkswagen shares.
The short sellers claimed Porsche misled investors by denying through much of 2008 that it intended to acquire Volkswagen and by using manipulative trades to hide its stock positions. Porsche said on Oct. 26, 2008, that it controlled most of Volkswagen’s common stock, causing the shares to surge as short-sellers raced to cover their positions.
“The New York court fully upheld Porsche’s request,” Albrecht Bamler, a spokesman for the automaker, said in a telephone interview. He added that the company will fight the appeal filed yesterday in New York. Porsche ``sees its position reinforced that the U.S. complaints are inadmissible,” he said.
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 applies to other similar complaints against Porsche.
Scott Tagliarino, a spokesman for Elliott Management, declined to comment. Jay Eisenhofer, a lawyer representing Black Diamond, didn’t immediately return a call seeking comment after regular business hours yesterday.
The swaps at issue in the case “were the functional equivalent of trading the underlying VW shares on a German exchange,” Baer wrote. “Accordingly, the economic reality is that plaintiffs’ swap agreements are essentially transactions conducted upon foreign exchanges and markets and not domestic transactions.”
Porsche took another step toward its planned merger with Volkswagen, based in Wolfsburg, Germany, and Europe’s largest carmaker, after the company’s shareholders on Nov. 30 backed a 5 billion-euro stock sale to lower debt. The sports-car maker agreed to combine with VW in August 2009 after a failed attempt by Porsche to gain control of VW.
Baer also dismissed claims against Porsche SE’s former chief executive officer, Wendelin Wiedeking, and its former chief financial officer, Holger Harter.
The case is Elliott Associates, Black Diamond Offshore, Ltd. v. Porsche Automobil Holding SE, 10-0532, U.S. District Court, Southern District of New York (Manhattan).