Hedge Funds Porsche Lawsuit

Hedge Funds Porsche Lawsuit

Hedge Funds Sue Porsche for $1 Billion over VW

Hedge funds holding Volckswagon AG Stock have filed a lawsuit against Porsch SE.  The suit claims that Porsch unfairly cornered the market on Volckswagon through undisclosed options in a failed takeover bid, causing the funds $1 billion in losses.  The hedge funds--including Elliott Associates LP, Glenhill Capital LP, Glenview Capital Partners LP--cried foul in October 2008 when, although Porsche had publicly denied seeking ownership of VW, Porsche announced it had accumulated most of VW's common stock.  This announcement caused a surge in the price of VW stock forcing traders to cover their positions with purchases of inflated stock. 
The short sellers claim that 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. Stuttgart, Germany-based Porsche said in October 2008 that it controlled most of Volkswagen’s common stock, causing the shares to surge as short sellers raced to buy shares borrowed in a bet that the Volkswagen stock would fall.
“Plaintiffs were forced to cover their short positions at prices that spiraled higher and higher,” according to the fraud complaint. “Porsche released billions of euros worth of shares into the short squeeze for its own profit. By releasing some of its own positions, Porsche was able to skim off outrageous short squeeze profits while still maintaining the bulk of its position for the takeover.”
The investors said in a statement that they are seeking to recover more than $1 billion in losses.  Source

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