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Report: Investment funds suing Porsche in U.S. for "short squeeze" fraud over VW

Filed under: Government/Legal, Porsche, Volkswagen, Earnings/Financials



The Porsche-as-hedge-fund escapade isn't fully resolved yet. Of course, the biggest denouement will be when Volkswagen finishes integrating the company early next year, but in the meantime, Porsche is still dealing with investor wrath after its stock market foray. A group of U.S.-based hedge funds is suing the Stuttgart carmaker for losses in excess of a billion dollars, claiming those losses came because Porsche misled them about its intent.

Porsche was coy about its stake in VW, and only disclosed its stock holdings in the company as required by German law. German law doesn't require a company to publicly declare cash-settled stock options as a share in the company. That means Porsche was sitting on shares it controlled that investors didn't know about, and investors read Porsche's statements on its intent as not having any interest in taking over VW. This, even though the company was knocking down doors all over Europe trying to get the VW law repealed...

When the extent of Porsche's holdings were found out, investors expecting VW's stock to drop had to cover their short positions buy buying a much smaller supply of stocks than expected, which drove VW's share price to intergalactic levels. And that's where the massive financial bloodletting happened. Porsche was already investigated and cleared by German authorities, who found that the company didn't break any disclosure laws. Redress in an American court, where the lawsuit was filed, could be just as difficult to come by.

[Source: Automotive News - sub. req'd | Image: Basheertome - C.C. License 2.0]Report: Investment funds suing Porsche in U.S. for "short squeeze" fraud over VW originally appeared on Autoblog on Thu, 28 Jan 2010 10:58:00 EST. Please see our terms for use of feeds.



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Re: Report: Investment funds suing Porsche in U.S. for "short squeeze" fraud over VW

imo, most of the financial markets have about as much integrity as a poker game in Vegas. When they 'win', the champagne is flowing and they are brilliant, and when they lose, they just can't admit they were in a high stakes game and lost.

Too bad investing has lost it's true purpose, to build and improve things - now it's just about making bucks and screw everybody else.:crazy:
 

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Re: Report: Investment funds suing Porsche in U.S. for "short squeeze" fraud over VW

imo, most of the financial markets have about as much integrity as a poker game in Vegas. When they 'win', the champagne is flowing and they are brilliant, and when they lose, they just can't admit they were in a high stakes game and lost.

Too bad investing has lost it's true purpose, to build and improve things - now it's just about making bucks and screw everybody else.:crazy:
I prefer to think that the fog has just been lifted for those us that believed that fable in the first place :)
 

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Re: Report: Investment funds suing Porsche in U.S. for "short squeeze" fraud over VW

I prefer to think that the fog has just been lifted for those us that believed that fable in the first place :)
Yeah, you're probably right. But then, after watching 'It's a Wonderful Life' dozens of times throughout the years, I always thought that there were many more 'Potters' out there then 'Georges'!:cheers:
 

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Re: Report: Investment funds suing Porsche in U.S. for "short squeeze" fraud over VW

I didn't know Porsche was cleared by the German government yet.

If so, what we have is a German company, buying shares and options of another German company, directly and indirectly and doing so in Germany. Correct?

So where do the funds get the standing to sue in Southern District, Manhattan? Serious question, perhaps some kind soul could clarify it for me.

I like that German word, schadenfreude. It is an appropriate reaction after what the financial people put the rest of us through the past two years.
 
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