I have mentioned before that I think HD VMD is simply doomed from the start. The HD VMD format was a third participant in the format wars, but never really made a showing at all compared to the Blu-ray and HD DVD formats.

The CEO of HD VMD parent company NME issued a statement today saying, “We cannot be sure where these rumours started or why, only to say that we have had no contact with EU Authorities in this respect. However, the NME management team cannot deny that we have watched the blue laser debate with interest and that Toshiba's withdrawal changes nothing for the majority of disc replicators and DVD based OEMs in the world, since the capital cost and risk of migrating to blue laser technologies in a market that has a finite life is nonsensical."

The rumor he is speaking to is one that I haven’t heard. Update: Rumor spread because of an April's Fools joke on the HDDVD site.
Apparently over the weekend a rumor started somehow that claimed EU officials confiscated money from Sony and Microsoft and gave the money to NME to promote fair competition in the HD optical disc market.

Via NME