Posche shares were trading 6.3 percent higher at 1009 GMT, but analysts warned the German company's triumph in court hinged on a legal formality rather than the substance of the case.

On Thursday, a five-justice panel of the New York State appeals court in Manhattan found Porsche had established that the state was the wrong place in which to bring the lawsuit.

The hedge funds now have 30 days to decide whether to pursue the case in the Court of Appeals, New York's highest state court.

"The decision is made with regard to the jurisdiction and not on a claim itself," DZ Bank analyst Michael Punzet said, adding other lawsuits seeking damages were ongoing.

A $2 billion lawsuit brought by other hedge funds in a U.S. federal court is pending.

Porsche was not immediately available for comment on Friday. The company has previously said the hedge funds' lawsuits are without factual and legal merit.

Last week, prosecutors in Porsche's hometown of Stuttgart announced market manipulation charges against former Chief Executive Wendelin Wiedeking and former Chief Financial Officer Holger Haerter tied to VW share purchases. The defendants' lawyers denied wrongdoing by their clients.

In the case dismissed by the New York State appeals court, hedge funds including Glenhill Capital LP, David Einhorn's Greenlight Capital LP and Chase Coleman's Tiger Global LP had accused Porsche of causing more than $1 billion of losses by cornering the market in VW shares.

The funds accused Porsche of engineering a "massive short squeeze" in October 2008 by quietly buying nearly all freely traded ordinary VW shares in a bid to take over the company, despite publicly stating it had no plans to take a 75 percent stake.

When Porsche revealed it had amassed control of roughly three-quarters of VW, shares of VW soared, briefly making the Wolfsburg-based carmaker the world's biggest company by market value. The surge caused losses for hedge funds that had bet on a decline in the stock price.

Former CEO Wiedeking's attempts to take over VW overwhelmed Porsche's finances, forcing it to sell its sportscar business Porsche AG to VW instead.

(Reporting by Edward Taylor and Jonathan Stempel; Editing by Erica Billingham)

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