Former Porsche executives for trial on VW takeover

Two executives charged with ‘information-based market manipulation’

Porsche’s failed VW takeover attempt left it with a big debt pile that pushed it to the brink of bankruptcy. Photograph: Reuters/Lucy Nicholson

Porsche’s failed VW takeover attempt left it with a big debt pile that pushed it to the brink of bankruptcy. Photograph: Reuters/Lucy Nicholson

Wed, Aug 27, 2014, 01:00

Two former Porsche executives must stand trial over the sports car maker’s failed attempt to take over Volkswagen, a Stuttgart court has ruled, paving the way for one of the most keenly awaited cases in German corporate history.

Wendelin Wiedeking and Holger Härter, respectively Porsche’s former chief executive and chief financial officer, were charged in 2012 with “information-based market manipulation” in relation to Porsche’s attempt to acquire VW via a complex and secretive options strategy.

Yesterday, a Stuttgart appeals court overturned an earlier lower court ruling that there was insufficient evidence to allow a trial to begin.

Hedge funds, which were wrongfooted by the takeover attempt and lost money, are expected to carefully monitor the trial as they pursue separate claims for billions of euros compensation from the Porsche holding company.

Porsche secretly began acquiring options to buy VW shares in 2008 but dismissed speculation that its ambition was to acquire a 75 per cent stake that would allow it to impose a domination and profit- transfer agreement.

However, prosecutors claimed the two executives had by February 2008 determined that the company would try to take over VW the following year.

Porsche’s public statements, prosecutors claimed, caused some investors to sell short VW stock.

When the true extent of Porsche’s options position was revealed in October 2008, VW shares surged to record highs as hedge funds betting on a fall in VW’s share price rushed to cover their short positions.

Porsche’s failed takeover attempt left it with a big debt pile that pushed it to the brink of bankruptcy; its carmaking operation was ultimately absorbed by VW in 2012. The two accused stood down from Porsche in mid-2009. – Copyright The Financial Times Ltd 2014