Friday, March 21, 2014

A Bridge To Far (for Snookered HFs)

Germans may have been resoundingly defeated in two world wars, but they can claim some vicarious pleasure from Porsche's unilateral victory in their legal fight with Allied Hedge Funds over Porsche's perfect corner of VW shares, the irony of which I discussed on separate occasion here, and here. The decision is final, and while there are no formal surrender documents, the Germans must be feeling rather satisfied.

When the HFs sued Porsche, you have to wonder what the HFs were thinking. Presumably, one would have thought they assessed the probabilities of success - something they do for a living.  And as any good decision-makers do, they must have taken the advice of expert legal counsel, taking into account that top lawyers, as Madoff and Lehman creditors can attest, in a complicated case, aren't cheap.

Yet, something is not right. Did they really think that a German commercial judge was going to give nefarious offshore hedge funds - primarily American-run and British-run - a couple of billion dollars from one of the poster-children of German industrial success? I'm no lawyer, but I know a thing or two about assessing probabilities, and this one always looked like long odds from every angle. Heavens knows what the aggregate legal bills of the case and two appeals came to, but likely sufficient to alleviate poverty in more than few under-developed countries for a reasonable period of time. One might wonder about how impartial an advising counsel can be as he mentally tabulates the hours involved in the case and its appeals.

This reminded me of Baron Thyssen-Bornemisza's bid, at the behest of his former-Miss-Spain (and fifth wife!!) "Tita", to dissolve The Baron's airtight Bermuda-domiciled family trusts that favored his children from previous marriages, at the expense of hers, resulting rather remarkably in what is now known as the most expensive court case in history. Now the skinny was this case never had a chance of success, trust law being inviolable. Yet Tita was sold the dream of success, and bought it whatever the cost. Armies of lawyers were dispatched to the case,  and more than a few visiting lawyers rented some of the expensive houses on the island,  flying to Bermuda so frequently, they were reputedly on a first-name basis with the cabin crew. The case had a predictable outcome, with everyone looking bad, but only the lawyers with anything tangible to show for their actions.

In the case of the plaintiff hedge funds suing Porsche, it is unlikely that the management companies paid the costs, more probably being expensed to the Funds' investors. If this were in fact the case, we have managers with mostly upside (potential performance fees receivable), egged on by litigators who cannot believe their luck at the cash-cow, working a case whose bill is footed, with only investors having the unfavorable pay-off pattern.

But monetary reasons are the less-than likely motive: after all, what are a few pennies to Croesus?? Rather, the relentless pursuit of legal action is likely a way for egoists to avoid culpability, to avoid admitting they were wrong, to preserve a proverbial "the clean sheet".  Not that there is anything shameful in getting royally squeezed out of a position. Supreme beings just don't like to admit it too loudly in public…for then, investors may start to believe they are mere mortals, easily taken out by a couple of amateurs, and where will 2&20 be then?

1 comment:

Anonymous said...

Shouldn't you're title bee "too far."