FRANKFURT, March 6 (Reuters) - Porsche Automobil Holding SE said 12 hedge funds have decided to drop out of a U.S. lawsuit accusing the German automaker of causing them losses by fraudulently cornering the market for Volkswagen AG shares.
The hedge funds, including Elliott Associates, were among 32 funds pursuing a $2 billion lawsuit accusing Porsche of engineering a “short squeeze” that caused them to suffer losses.
A New York judge dismissed the hedge funds’ case in December 2010, but that decision was later brought to the federal 2nd U.S. Circuit Court of Appeals.
Porsche said 2nd Circuit approval is needed before the 12 funds can drop out of the case. The appeals of the remaining 20 hedge funds remain unaffected.
The automaker also said the move does not affect a separate lawsuit brought by the hedge funds in a court in Germany’s Braunschweig, which seeks damages of about 1.8 billion euros. Several other lawsuits against Porsche are also still pending
The hedge funds have said they were victimised when Porsche quietly bought nearly all the freely traded ordinary shares of Volkswagen as part of a plan to take over the company, contrary to its public statements that it had no plans to do so.
When Porsche revealed its holdings in October 2008, VW shares soared, briefly making the company the world’s biggest by market value.
This caused the short squeeze and created losses for the hedge funds, which had entered swap agreements and would have benefited from a decline in price.
The U.S. case is Viking Global Equities LP et al v. Porsche Automobil Holding SE et al, 2nd U.S. Circuit Court of Appeals, No. 11-0397. (Reporting by Maria Sheahan. Editing by Andre Grenon)