One of the world's leading automotive brands, Volkswagen, stated on Monday (9/4) that it will take Porsche public. In comparison to other Volkswagen-owned brands such as Audi, Bentley, Bugatti, and Lamborghini, Porsche has been making the most profits ever since they were acquired and merged back in 2011. Porsche's luxury brand image can conceivably grant higher prices and potentially lead to one of the biggest IPO that Europe has ever seen. Porsche's operating profit jumped 22% in the first half of 2022, in contrast to an 8% fall at the Volkswagen brand which is more mass market-oriented. While the Porsche brand is strong, market capitalizations of other luxury carmakers such as Aston Martin and Ferrari have fallen. At the high end of estimates, the IPO could be among the most grande in German history and the biggest in Europe since 1999, according to Refinitiv data Qatar will be a cornerstone investor planning to commit 4.99% stake in the newly listed company. Furthermore, acting as Joint Global Coordinators in connection with the proposed transaction includes BofA Securities, Citigroup, Goldman Sachs and many other investment banks will be acting as Joint Bookrunners.
The upcoming listing that will be conducted in the Frankfurt Stock Exchange have raised several concerns among investors. With European stock markets in freefall, inflation at an all-time high, and the on-going current energy standoff between Europe and Russia this send luxurious brands stocks such as Ferrari and Azimuth to plummet, Porsche’s contentious timing of the decision has been questioned. Having a look at Europe’s auto stocks, it has fallen 27% in local currency terms this year as expectations of a recession have surged. Even Ferrari, the luxury brand Porsche is often compared with, is down to 16%. Despite the disquietude, Oliver Blume, Porsche Chief Executive Officer, said in a press conference on Tuesday (9/6) that the listing might open doors for capital markets that are short on potential investors. Porsche declared its intention to float for an IPO in late September or early October with a goal of finishing by the end of the year. However, they have warned that the timing is subject to future capital market developments. If the initial public offering is successful, Volkswagen is set to convene an extraordinary general meeting in December to propose a special dividend of 49% of the proceeds to shareholders to be distributed in early 2023.
Volkswagen stated that an IPO would be a great step in the transformation of the company and to execute its strategy as it aims to build out its software and electric vehicle offering. Porsche targeted that 80% of its car sales will begin moving into the electric vehicles in 2030, as the Taycan passed Porsche’s iconic 911 sports car in sales and became the company’s third-best-selling model after the Macan and Cayenne sport-utility vehicles. Furthermore, Porsche is also working towards a net carbon-neutral value chain and a net carbon-neutral use for future BEV models as a part of their ESG initiatives. The Supervisory Board of Volkswagen has decided to pursue an offering of up to 25% of non-voting Preferred Shares of the company. Investors expect a valuation between €60 billion and €85 billion (US$60 billion and US$85 billion) with Preferred shares will also be offered to retail investors in countries in Europe including France, Spain and Italy, an attempt to tap into Porsche's loyal fan base. As part of the preparation for the IPO, Porsche’s stock has been split into 50% ordinary shares and 50% nonvoting preferred stock. With Porsche shifting to electric vehicles, it is hoped that by going public it could increase its revenue, as it intends to target revenue growth at a 7-9% compound average growth rate. It is also hoped that injecting fresh cash into VW’s coffers that executives say will help the company bankroll its transition to a more diversified business that includes electric vehicles and self-driving cars.
Sources:
CNBC
Reuters
Wall Street Journal
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