According to Porsche Automobil Holding SE (ETR:PAH3) (OTCMKTS:POAHY)’s interim report it could be subject to a fine and be forced to forfeit its profits if two former executives are convicted of market manipulation.
The failed takeover has been under investigation for years, but investor confidence had improved of late after it appeared that the company would not be directly affected by the ongoing trials. This latest twist in the tale follows a ruling that the company is itself could be held responsible, not just former executives.
ValueWalk's Raul Panganiban interviews Joseph Cioffi, Author of Credit Chronometer and Partner at Davis + Gilbert where he is Chair of the Insolvency, Creditor’s Rights & Financial Products Practice Group. In the interview, we discuss the findings of the 3rd Annual report. Q2 2021 hedge fund letters, conferences and more The following is a computer Read More
Porsche – Volkswagen hidden takeover: Full disclosure
The former CEO, Wendelin Wiedeking, and CFO, Holger Härter, will stand trial next year accused of hiding company plans for a takeover of Volkswagen AG (ADR) (OTCMKTS:VLKAY) (ETR:VOW), thus manipulating the price of shares.
Prosecutors are focusing on a particular press release from 26 October 2008, in which it is alleged that Porsche Automobil Holding SE (ETR:PAH3) (OTCMKTS:POAHY) did not fully reveal the options position that it held in VW. The press release caused VW stock to soar, with hedge funds that had shorted the stock losing billions of euros covering their positions.
These hedge funds claim that had Porsche detailed its positions, there would have been no panic and the short-squeeze would not have happened.
German law dictates that only individuals can be charged with offences, although if company executives flout regulatory rules then said company can be fined up to €10m. This fine can be increased if the financial benefit obtained is greater than this statutory maximum.
The hedge funds claim that the market manipulation led to a €5 billion cash inflow to Porsche accounts. The company refused to comment on the figures but maintained that it had always acted in accordance with the law, claiming that the new accusations were “without merit” and as such there are “no grounds for confiscation.”
The takeover never came to pass and the company was bought by the VW Group in 2012. The failed takeover has affected Porsche Automobil Holding SE (ETR:PAH3) (OTCMKTS:POAHY) stock prices for the past few years, and this latest investigation is pivotal.
Wolfgang Porsche and Ferdinand Piëch, the chairmen of Porsche and Volkswagen AG (ADR) (OTCMKTS:VLKAY) (ETR:VOW) respectively, are under investigation accused of abetting market manipulation. The powerful Porsche and Piech control Porsche SE, holding all of the voting shares.