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The Volkswagen Soap Opera Rises From The Dead As Perry, Elliott And Glenhill Sue For Alleged Stock Manipulation
Update: It appears Larry Robbins does in fact have the money to pay for legal representation, and is involved in the lawsuit as GCM. The question of when the fund will rise above the high water mark, however, still stands.
Regular readers know our fascination with the Volkswagen "soap opera" which, as a result of a massive short squeeze in late 2008, resulted in VOW stock being the single most expensive stock in the world, albeit for a short period of time. In fact, last February we noted:
"At first sight it is glaringly obvious that Porsche did not act in good
faith during the sequence of events disclosing its stake accumulation
especially considering the resultant profits to the company - in 2008
Porsche generated a €1 billion profit from car sales and €6.8 billion from Volkswagen option trades... If hedge funds are successful at proving manipulation, which this
disclosure may have made significantly easier, Porsche could be on the
hook for a full refund of the option proceeds, in addition to further
civil disgorgement and/or criminal liabilities. While the luxury
carmaker is currently in swimming financial health with a huge cash war
chest thanks to the options trades, any regulatory escalation could
result in a rapid and dramatic downfall of the company which has a €10
billion term loan maturity in March, as banks may run away from a
debtor that may be liable for a €7 billion cash outflow. And if the
dominoes really collapse and Adolf Merckle's suicide is found to be a
result of the alleged stock market manipulation, the life of Porsche
CEO Wendelin Wiedeking may get really ugly fast."
Sure enough, today the life of Porsche, and its now-former CEO Wendelin Wiedeking, just got pretty ugly. Dow Jones reports, that the bulk of the hedge funds, that were in the groupthink trade de jour at that time, the very same hedge funds we speculated may sooner or later end up suing the carmaker-cum-busted hedge fund, just came out, guns blazing, and are alleging stock manipulation.
A group of investment funds Monday filed a lawsuit in the U.S. against German sports car maker Porsche Automobil Holding SE (PAH3.XE), its former chief executive Wendelin Wiedeking and former chief financial officer Holger Haerter seeking to recover more than $1 billion in losses related to Porsche's ill-fated takeover bid for Volkswagen AG (VOW.XE).
The complaint, which was filed in federal court in Manhattan, "explains in detail how Porsche SE manipulated the price of VW stock as it secretly accumulated control over almost all of VW's freely traded shares," the funds said in a joint statement.
As expected, the funds doing the suing, are those that got burned the most. Surprisingly, Larry Robbins' Glenview is strangely absent. One would think after a massive P&L surge in 2009 (granted still below the high water mark), they should be able to fund their share of legal fees.
The investment funds include Elliott Associates LP, Glenhill Capital LP and Perry Partners LP. The funds are represented by U.S law firm Bartlit Beck Herman Palenchar & Scott LLP.
And here are the details from the lawsuit:
During Porsche's takeover attempt, Volkswagen shares in October 2008 briefly soared to more than EUR1,000 a piece as short-sellers scrambled to cover positions after Porsche revealed that it had access to almost the entire free float of VW's outstanding shares. Many investors were wrong-footed by the announcement.
"Porsche released billions of euros worth of shares into the short squeeze for its own profit," the funds said, adding that "the defendants repeatedly misled investors and lied about Porsche SE's positions and intentions with respect to VW."
"Porsche SE should be held accountable in a court of law," said Phil Beck, a lawyer for the funds. "We will do whatever it takes to make sure the rule of law is upheld."
Unfortunately for Porsche, the company may not have the clout of GM's unions to bail it out should the world economy take a second dip, and with average ASP well into the stratosphere, and Germany having bigger fish to fry, this development was likely the last thing the carmaker needed. Speaking of, where is PORSCH CDS EUR SR 5YR trading these days?
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maybe this explains that ugly ass Panamera crap
most interesting. I followed this story but prior to my becoming ZeroHedged. Many thanks for your insight and research. A side thought - as a fully dysfunctional non-finance type, does everything and everyone in the business sphere have their debt CDS-ized? Seems everywhere you look a company, an organization, an entity of every ilk and stature has their own CDS? I realize that the stated $6T or $60T or $600T in CDS is a major cloud still hanging, but just a thought? and thank you again for all your excellent effort.
Robbins is most certainly in there - Glenview is quoted as GCM. In fact a conversation Robbins had with the head of IR at Porsche is cited in the complaint. You should read your documents more carefully, Tyler!
FINALLY !!
Um, aren't both companies based and traded in Germany?
Then the quesiton becomes why sue here?
Or can they even sue here?
Or maybe in them thar Cayman Islands?
Humph. I bet they get nothing.
Agree.
The German regulator (BAFin I believe) already announced moths ago no German law was breached.
Well they can at least try...
Eh... dumb.
How much should these guys (Perry, Elliot) pay for being shown that dumb "sure-thing" "stub trades" are for morons?
That's probably worth $Bs to you. You paid for your lesson, now move on.
"the defendants repeatedly misled investors and lied about Porsche SE's positions and intentions with respect to VW."
So what about the C conversion of preffered to common,which mysteriously coincided with their "alleged" leaked letter to the media?And how many hedgies got burne in the process(not that I shed tears for them,since they got me out of my long due to their constant shorting,lol)?. But what would a case against C uncover about the hatched plan and the planned short squeeze,after the market was intentionally led to drift downward by many officials(and corporate ceo)?That would be fun to watch..
C is different, because the U.S. government was directly complicit in fucking hedge funds over on that one.
I'm not crying. I'm a big kid who has certainly always gotten more than is "fair" from being lucky enough to be born in America and to have two parents and good public schools. But man was C an eye-opening experience; being on the wrong side of the U.S. executive branch is only slightly less dangerous than being on the wrong side of Russia's. Plus, 99% of Americans were or would have been delighted to see hedgies lose their shirt in the C short squeeze.
Thank god VOW had happened just a year earlier; it was a good lesson in position size. I hope Porsche loses every fucking asset they have.
hedge funds suing for manipulation. that's rich in a market whose prices are defined by the marginal balance sheet that does the buying/selling.
Compared to what is invested in pensions, and what is invested in annuities, courtesy of a generous subsidy from the government to insurance companies due to their ridiculous tax treatment, hedge funds have very little buying/selling power in the market.
Hedge funds squeal when bitten, how about the many times they have squeezed shorts (as robotrader points out almost on a daily basis). Good luck to Porshe, how dare a US court convict when the SEC condones the endemic fraud and malpractice on Wall St.,
... because two wrongs make a right when you have populist fervor?
My how the hedgies squeal when bitten, as Robotrader points out on an almost daily basis they manipulate and squeeze all the time and with the SEC's blessing. Good luck to Porshe, the hedgies made fortunes with their naked shorting of Financials in 2008, now when someone takes them out at their own game, they run to the courts!
Long prefered / Short ordinary....
As Einhorn has said re the VW short squeeze, if HF's were the one's who secretly amassed the position then made absurd returns on options trade via the short squeeze the short squeeze Porshe manufactured there would've been a huge uproar and indictments would've been handed down the next day. When a company misbehaves in such a fashion there should be no difference in their treatment under the law. Manipulation is manipulation.