Mergers and Acquisitions
Miles Francis Binney
affiliation not provided to SSRN
January 31, 2009
“It’s a Porsche – No! It’s a hedge fund...” In 2008 Porsche shocked the world as it appeared to take on hedge funds and made spectacular profits, three times more money than they made from selling cars. This spawned the popular joke that Porsche is “an investment bank with a car showroom attached” 2 . A lacuna in the German laws on disclosure allowed Porsche to build up a secret options stake in Volkswagen of which the investment market was not aware. The result was a grand squeeze on hedge funds and exogenous profits for Porsche. Since these events the hedge funds have complained bitterly about the inadequacy of the
disclosure rules in Germany and are demanding reform.
The disclosure regime in any jurisdiction is vital as it allows parties to contract on a more equal footing. More specifically in investment markets, it allows for a better appreciation of risk. An adequate understanding of risk in finance is conducive of stability and efficiency. The hedge fund industry is a particularly innovative and dynamic field, exaggerating the requirement. The current economic situation has led to a more fragile financial system, resulting in dynamism of a different nature. The risk elasticity of stability is increasingly elastic, giving a more dynamic market which responds very differently. This is evidenced not just in theory, but it is also observable practically.
The central point of this article is to assess the importance of a disclosure regime in the light of what happened with Porsche. This episode provides a good example to highlight the importance and impact of the disclosure regime and also allows for an adequate comparative outlook. The facts of the situation will be analysed from various perspectives: (i) an individual perspective the facts of the Porsche deal and an understanding of what actually happened; (ii) a contextual perspective to Gwen Robinson. It's a Porsche – No! It's a Hedge Fund. November 13th, 2008. Financial Times 0851599 identify aspects to advance the understanding of the subject; (iii) a relational approach to make sense of recent developments and to give general feedback on the situation based on a comparative assessment; (iv) an approach to highlight areas for reform and further research.
Number of Pages in PDF File: 22working papers series
Date posted: September 2, 2010
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