Corporate & Securities Law

WpHG basis for HypoRE damages claims

By Werner R. Kranenburg

On 2 October 2007, Hypo Real Estate Holding AG’s (FRA: HRX) shares were trading well above ?40 a share. That day, HRX completed the acquisition of Deutsche Pfandbriefbank AG (DEPFA) for more than ?5 billion. (press release) At the close of trading yesterday, the shares were at just above ?2, the combined group worth just over ?400 million.

The board of directors of HRX allegedly withheld price-sensitive information in relation to this acquisition and since then in relation to the combined group’s state of affairs. It wasn’t until 29 September 2008, when HRX announced a ‘major new funding facility’ (press release), that the real, dire financial situation the group was in became clear. In the period between those dates, it had among other things released an operating performance update (7 November), its preliminary 2007 figures (15 January) and several interim reports (31 March, 30 June). The resulting decline of its share price damaged investors, according to the law firm Winheller Rechtsanwälte in this press release (in German, in English; details, in German).

Winheller therefore urges shareholders to claim damages under sections 37b and 37c of the Gesetz über den Wertpapierhandel (in German; Securities Trading Act). Those two sections provide the legal basis for claims against issuers of financial instruments that trade on German exchanges, due to omission of price-sensitive information or publication of untrue information. The statute of limitations for such claims is no longer than three years from the omission or publication, respectively, though it could be as short a period as one year from when the ommission or untruth was known to the third party (WpHG §37b(4), § 37c(4)). Hence Winheller’s advice to file a claim no later than 15 January 2009 (this Friday), one year after publication of the 2007 figures, though arguably the omissions and/or publications continued and were not known until the announcement of 29 September 2008 and therefore a claim by 29 September this year could still be within the limitations period.

Further to these same allegations, last month the district attorney’s office in Munich (with the involvement of Germany’s financial services regulator, Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin)) searched Hypo Real Estate’s offices and the homes of former executives and a former chairman (Bloomberg).

Full post as published by With Vigour and Zeal on January 14, 2009 (boomark / email).