Porsche has successfully avoided a $1.95 billion lawsuit thanks to judges in Stuttgart, Germany who dismissed a lawsuit pursued by 23 hedge funds after Porsche’s failed takeover of the Volkswagen Group. According to a report from Bloomberg, the hedge funds claimed that Porsche misled investors about the plan to acquire Volkswagen in 2008.
All of this drama between Porsche and the Volkswagen group began unfolding as early as 2005, when Porsche began buying Volkswagen shares and announced plans to become the largest single shareholder by purchasing 20 percent of the Volkswagen Group. In 2007, Porsche’s stake had increased to 30 percent, but then-chairman Wendelin Wiedeking announced that a complete takeover was not in the cards. Porsche continued to buy up more shares, though, and Wiedeking admitted in 2008 that the company planned to take over 75 percent of Volkswagen shares during 2009—a move that would cross a threshold into the “domination and profit transfer” contract.
However, because of the financial collapse in 2008, banks refused to lend Porsche more money to complete the acquisition and instead started calling in loans that had been used to finance the share buy-up. Wiedeking began looking for investors, but Volkswagen, working in concert with its own investors and German chancellor Angela Merkel, advised potential investors in Qatar to invest in Volkswagen instead. This meant that Porsche essentially collapsed into Volkswagen, with a full merger said to be complete by 2011 -- the opposite of Porsche's intentions. With Porsche becoming the Volkswagen Group’s tenth brand, Wiedeking made his exit and current Porsche CEO Matthias Müller took the reins in 2010.
The 23 hedge funds that filed the lawsuit against Porsche claimed that the company denied throughout 2008 that it intended to acquire Volkswagen, which misled investors as Porsche and Volkswagen stocks rose and fell dramatically as the failed acquisition unfolded. However, the presiding judge in Stuttgart ruled that Porsche was not liable and afforded the dismissal of the lawsuit. The judge said there wasn't adequate evidence that Porsche planned to takeover VW in 2008, and that even if there was evidence, law would not hold the company liable. This is good news for Porsche and Volkswagen, as the hedge funds were seeking a total of $1.95 billion in damages in this lawsuit.
Porsche’s legal troubles may not be over, though, as the company has additional hearings scheduled for later in April and May. Stay tuned for more news about this pending litigation as it continues.