Wolfgang Porsche and Ferdinand Piech face $1.8 billion lawsuit

Wolfgang Porsche and his cousin and Porsche board member Ferdinand Piech are being sued by seven hedge funds over its failed takeover bid for Volkswagen.

They are seeking 1.8 billion euros ($2.4 billion) in compensation.

Porsche has been accused of misleading markets in the run-up to its takeover bid for VW in 2008.

Porsche initially dismissed speculation it was seeking to takeover VW, but later revealed that it owned or had positions on almost 74% of VW shares.

Some investors had bet against Volkswagen shares, expecting them to fall in the absence of any firm takeover bid from Porsche.

However, Porsche’s disclosure of an increased holding triggered an unprecedented stock market squeeze on VW shares as investors rushed to buy them to cover their short positions.

Porsche, which has earlier faced similar cases, has denied any wrongdoing.

“Porsche SE and its supervisory board members will defend themselves with all available legal means,” the carmaker said.

Porsche’s attempt to take over Volkswagen eventually failed as it fell short of acquiring the required 75% stake.

The global financial crisis and the slump in the automotive sector made it difficult for the carmaker to raise enough money to buy the remaining stake.

Nevertheless, it accumulated large amounts of debt in the process and was sued by investors who accused it of misleading them.

In a dramatic turnaround of events, the firms agreed a deal in 2009 under which Volkswagen agreed to take over Porsche.

Volkswagen acquired a 49.9% stake in Porsche in 2009.

In 2012, the firms agreed another deal, under which Volkswagen bought the remaining 50.1% stake in Porsche for 4.46 billion euros plus one VW common share.