In recent years, several luxury car manufacturers such as Ferrari e Aston Martin which were listed with very different outcomes. While the listing of Ferrari was a resounding success, on the other the fate of Aston Martin is close to decline and has already happened in the history of this historic British car brand.
Now it’s Volkswagen’s turn to put its sports brand up for sale Porsche and in this sense, the first day of listing (IPO) is scheduled for the next September 29.
A long story
One reason of particular interest for Porsche’s IPO according to BG Saxo analysts is given by the ownership structure of the company which is similar to a maze: Volkswagen owns the Porsche brand and automotive production, but in turn is owned by the company. Austrian Porsche-Piech family.
The history of this particular ownership structure began with the privatization of Volkswagen in 1960 when laws were enacted that any shareholder with more than 20% would veto any decision. Since then, the German government has retained 20.1% and thus control over Volkswagen. But in 2005 Porsche SE (the holding company of the Porsche family) began to accumulate a stake in Volkswagen and in 2006 it controlled 25.1%, while in October 2008, Porsche SE announced that it had acquired 42.6%. with options for another 31.5% as he wanted to go up to 75% to consolidate Volkswagen’s cash position in its balance sheet. Subsequently in 2011, Porsche and Volkswagen merged and Porsche AG was qualified as a subsidiary of Volkswagen AG.
The details of the IPO
In the IPO prospectus it is specified that Porsche AG will divide its share capital into two parts of 455.5 million shares each, between ordinary and preferred (for a total of 911 million shares, a reference to its iconic car model) .
The share class that will be listed on the Frankfurt Stock Exchange under the symbol of ticker P911 it is the preferred one that does not have the right to vote but is entitled to a dividend of 0.01 euro per share more than ordinary shares.
Volkswagen plans to sell 25% plus a stake in Porsche AG to Porsche SE, thus passing on the right to block minorities to the Porsche family.
Furthermore, Volkswagen plans to sell 25% of the preferred stock on the market thanks to the news that the offer has already been fully subscribed in the entire price range from € 76.50 to € 82.50 with the Qatar Investment Authority, the Norwegian Sovereign Wealth Fund and T. Rowe Price already involved in the IPO.
The price range indicated carries the valuation of Porsche AG at 75 billion euros, a value close to Volkswagen’s market value of 91.6 billion euros to date. These numbers make Porsche AG’s IPO potentially the fifth largest IPO in the history of Europe.
According to analysts from BG Saxo, Volkswagen sells Porsche AG shares to the public to achieve two goals; on the one hand, reducing the valuation discount on Volkswagen shares from cross-shareholdings and on the other hand unlocking more value from a luxury brand such as Porsche.
Additionally, the public offering will raise capital to help Volkswagen go fully electric over the next decade. In this sense, the Volkswagen is expected to raise around € 19.5 billion from the IPO in which it promises to pay around € 9.6 billion in a special dividend by the beginning of 2023.
The fundamentals
Porsche is a well-managed company that spawned in 2021 33.1 billion euros in revenues with a operating profit of 5.3 billion euros and in the first half of 2022, Porsche’s revenues grew by 8%, with strong cash generation of € 3.9 billion, a very good result considering the general weakness of the automotive industry; but still lower than Ferrari, which saw its revenues grow by 17.3% year-on-year and 24.9% yoy in the first and second quarters respectively.
The main question for potential Porsche shareholders is whether the company can make a successful green transition to becoming fully EV while preserving or even expanding margins. It is clear when comparing Porsche to Ferrari that there is room for improvement and a potential benefit if Porsche were to improve its operations and further expand its brand. Volkswagen has promised that synergies will continue to exist between the Volkswagen group and Porsche, but for Porsche’s future success we believe that the key is its greater autonomy.
The risks
One of the absolute key risks for the Porsche title is the growing cost of living crisis, with the level of inflation worrying both in Europe and the United States, with rising energy costs reducing disposable income in Europe. The sector most at risk, due to the decline in demand during this difficult periodis the luxury goods sector in which the automaker is located.
Porsche is clearly on the high end with sales of up to 1% of income and wealth distribution and could also significantly reduce its consumption during the ongoing energy and inflationary crisis. Since Porsche buyers are wealthy individuals, it is reasonable to assume that the decline in equity and bond markets could have a major impact on sentiment among the richest 1% in the world. Another risk for Porsche is given by a scenario in which the Euro starts to grow again, which would reduce the value of international sales and its competitiveness abroad. The war in Ukraine or the new Covid outbreaks may ultimately have an impact on supply chains and demand for Porsche cars.