UPDATE: Barclays: Supreme Court Ruling Undermines Lawsuits Against Porsche
26 June 2010 - 1:34AM
Dow Jones News
Barclays Capital said Friday that a landmark decision by the
U.S. supreme court Thursday undermines lawsuits filed by U.S. hedge
funds against German automaker Porsche Automobil Holding SE
(PAH3.XE).
"We are now incrementally positive on Porsche," Barclays analyst
Brian Johnson said.
In a note to clients Monday, Barclays highlighted the risks and
possible delay for Porsche's planned merger with Volkswagen AG
(VOW.XE) that the U.S. lawsuit posed. "Our analysis was based on
the nearly 50 years of case law that would find securities law
jurisdiction in the U.S. based on a 'conduct and effects' test," he
said.
Johnson said that in Thursday's majority opinion in Morrison vs
National Australia Bank authored by Justice Antonin Scalia, "the
Court threw out this well established case law by asserting that
the Exchange Act was never meant to apply to foreign stocks traded
on foreign exchanges, even if they have some U.S. impact or effect,
or if part of the alleged fraudulent conduct occurred in the
U.S."
During Porsche's ill-fated takeover attempt, Volkswagen shares
in October 2008 shot up to more than EUR1,000 apiece 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.
At 1455 GMT, Volkswagen common shares traded down EUR0.53, or
0.7%, at EUR71, while Porsche shares were up EUR0.57, or 1.6%, at
EUR35.63. The DAX bluechip index was down 1.1%.
A spokesman for Porsche and a representative of the U.S. funds
weren't immediately available for comment.
Last week, Porsche described as "without merit" the lawsuits
filed by U.S. investment funds in a New York court alleging market
manipulation and securities fraud related to its stake-building at
Volkswagen.
On Jan. 25, 17 plaintiffs filed a complaint for damages in the
U.S. against Porsche, its former chief executive, Wendelin
Wiedeking, and its former chief financial officer, Holger Haerter.
The complaint has been expanded to 41 plaintiffs, and the alleged
damages are estimated at more than $2 billion.
The 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 Kleinberg,
Kaplan, Wolf & Cohen.
An additional claim for damages was submitted in May to the same
court seeking several hundred million dollars.
Separately, Porsche's disclosure policy during the takeover
attempt and related movements of VW's share price have prompted
scrutiny from German public prosecutors. That investigation
continues.
In Germany several institutional investors have launched legal
actions against the automaker, which according to Porsche relate to
an alleged loss of profit estimated by the investors to be about
EUR2.4 billion. Porsche last week described these claims as being
"without merit".
-By Christoph Rauwald, Dow Jones Newswires; +49 69 29 725 512;
christoph.rauwald@dowjones.com
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