The first moves are being made to bring legal action against Volkswagen on behalf of investors who lost money following last month’s revelations that the car manufacturer used “defeat device” software on thousands of diesel vehicles sold in the US, enabling them to violate emissions standards.
Around €25bn was wiped off the company’s market capitalisation on German exchanges in two days following revelations of the fraud by US environmental agencies, the share price plummeting from €160 to €100.
Bentham Europe (BE), a third-party litigation funder, said it is now in discussions with institutional investors worldwide to fund a shareholder action in Germany against VW, alleging breaches of German securities law over an eight-year period from 2007 to 18 September 2015.
It is intended to bring the actions – on behalf of investors who bought VW shares on German exchanges – in the German courts.
BE said it would instruct lawyers to commence proceedings as soon as possible.
Shareholders will seek to establish they are entitled to compensation for losses caused by VW’s alleged breaches of Germany’s Securities Trading Act, based on the company’s apparent failure to inform the market, over a long period of time, about its suspected practice of installing and using the “defeat device” software in a very significant number of vehicles it manufactured and sold into the US and other world car markets.
The actions will claim this information constitutes inside information under the relevant German legislative provisions and should have been immediately released to the market.
BE is inviting all current and former shareholders that acquired at least 10,000 VW shares on a German exchange during the period 1 January 2007 to 18 September 2015 inclusive, and that had not sold all of those securities before the market opening on 21 September 2015, to contact it to participate in the action.
Jeremy Marshall, CIO at BE, said: “The apparent secret use of defeat devices by VW and the ensuing scandal that erupted upon disclosure of this practice has caused significant harm to Volkswagen’s reputation and financial position, as well as raised serious concerns as to the corporate governance regime within one of Germany’s blue-chip companies.”
He added: “Shareholders are justifiably concerned VW has appeared to have allowed this practice to continue for what may have been a number of years, in the assumed knowledge that its disclosure to the market would be likely to cause them and their shareholders significant financial harm.
“We expect a legal claim to reveal the true extent of the problem and allow shareholders to seek compensation for the undoubted harm that has been suffered.”
Bentham Europe is a joint venture between IMF Bentham, a publicly listed company that funds litigation and arbitration claims in Australia and elsewhere, and subsidiary entities of funds managed by Elliott Management Corporation, a US-based advisory firm.
Meanwhile, US lawyers Robbins Geller Rudman & Dowd have started a class action in the US District Court Eastern District of Virginia, alleging violations of the federal securities laws by Volkswagen AG and certain of its officers and/or directors.
The action has been brought on behalf of purchasers of VW publicly traded ordinary and preferred American depositary receipts between 19 November 2010 and 21 September 2015.