Tuesday, February 12, 2013

The Take-Over Story

This is one of those little business stories that you tend to view, have a laugh, and remind yourself of how business operations really work.

In the business world....there is always some company talking up a scheme of taking over another company.  Unfriendly take-overs would be a good term to keep in mind here.

Back around 2008....Porsche got into a scheme.  They weren't in a great financial situation, but they weren't dismal either.  They were delivering yearly profits, and employees/stock holders were all happy enough with what they had.  Their stock prices were relative, and not jumping all over the place.  If you were an investor....you'd be happy with Porsche, but you didn't have huge expectations of a major shift change.

Well....Porsche leadership laid out a scheme.  It involved planning a take-over of Volkswagen.  Part of the scheme was simply to act like you weren't planning anything.  Part of the scheme was to toss rumors of their intent as far as possible.  And part of the scheme would appear an effort to drive up their own stock prices....quietly....step-by-step.

About a half-year went by, and then Porsche came out and really hinted strongly in public that they really might be planning such a take-over.  As you can imagine....Porsche stock went higher, and Porsche likely utilized their period to sell some stock and prepare what was their maneuver....taking over VW.

No one much talks of the next period....but it would appear that Porsche stumbled badly in this period of attempting to buy VW.  VW executives were aware of the plan.  Maybe the VW guys just assumed that Porsche really didn't have cash to pull the trigger.  It's hard to say on this.

But in a matter of weeks....Porsche's reputation over this attempted take-over, and failure.....really screwed up the company.  The best estimate is that they lost around $10 billion in value.  They lost so much value....that they were now in trouble.

In roughly a year....VW ended up buying a significant portion of Porsche.....mostly because they were undervalued and VW had the cash (even after the 2008 bank failures, which ought to be another question that the authorities ought to ask, but won't).  You'd sit there and wonder how anyone really survived the banking crisis in 2008.

Naturally, guys who owned Porsche stock.....sat there in total shock and disbelief.  Some had the stock in their portfolio for years, and it was a fairly reliable stock.  So they sat into blaming management and demanding an investigation.

Who is under review now?  It's gone beyond Porsche's management team, and even now includes the VW boss....Ferdinand Piech, and even a labor union chief as well.

Could the Porsche folks have built up a double-scheme, where half of the Porsche team thought they were going to take over VW, and the other half waiting until the right moment to bring Porsche stock down to a level where they were heavily discounted?

It's hard to say.  I suspect that the authorities will spend at least a year trying to figure who did what and how this was all orchestrated.  Someone made a fair amount of profit.  The question is....was it legit and accidental?  Or did a dozen guys conduct one of the best fake take-overs in German history?  Even if you can connect the dots.....do you have a witness or two to deliver a four-star court episode?

The truth?  You just don't know.

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