Porsche now 'full speed ahead' for landmark IPO
VW AG announces its intention to publically list a minority stake in Porsche. Expect the outcome to be seismic...
And so, finally, it begins. Porsche’s long-anticipated Initial Public Offering, widely expected to be among Europe’s biggest, was officially signalled by its parent, Volkswagen AG, late on Monday. Despite choppy market conditions, the manufacturing giant has confirmed that it plans to list a minority stake in the famed car maker. Up to 25 per cent of non-voting ‘Preferred Shares’ would be offered in the IPO, which is expected by the end of September or beginning of October, with the listing on the Frankfurt exchange finalised by the end of the year.
“We very much welcome the decision of the Volkswagen Supervisory Board in favour of an IPO of Porsche AG,” Oliver Blume, Chairman of the Executive Board of Porsche AG said. “This is a historic moment for Porsche. We believe an IPO would open up a new chapter for us with increased independence as one of the world's most successful sports car manufacturers. It would strengthen our ability to further execute our strategy.”
While PH won’t pretend to understand the minutia of the IPO itself - it includes dividing up the share capital of Porsche AG into 50 per cent ‘Preferred Shares’ and 50 per cent ‘Ordinary Shares’, and apparently features a 25 per cent plus one blocking minority of the latter for the Porsche and Piech families via Porsche SE - several objectives are being targeted with the share sale.
One, plainly, is increased entrepreneurial independence (Porsche’s words). The manufacturer wants to ‘unleash its full potential by leveraging its many strengths’. Among these, it lists the strength of the brand, racing heritage, structural growth, customer experience, battery-electric tech and compelling financial performance. And when it is targeting Group revenues of 38 to 38 billion euros for 2022 alone, it is easy to understand how investors have come to expect a valuation as high as 85 billion euros.
“We believe Porsche is well positioned and will continue to focus on high-quality and exclusive products, electromobility and sustainability,” noted Lutz Meschke, Deputy Chairman of the Executive Board. “Therefore, I am optimistic that we could attract a very strong and well-diversified shareholder base with the IPO.”
Among that base is said to be the Qatar Investment Authority, which has agreed to take a 4.99 per cent stake in the newly listed company, subject to agreement. The preferred shares will be offered to retail investors in Germany, Austria, France, Italy, Spain and Switzerland, although Bloomberg has reported that Porsche has been ‘gaging interest’ among the continent’s billionaires, tipping Red Bull founder, Dietrich Mateschitz, and LVMH Chairman Bernard Arnault as potential big-name investors.
Of course, when Porsche talks about ‘independence’ it means in relation to Volkswagen AG. Consequently, as part of the IPO, the domination agreement that dictates profit and loss transfer to its parent would be terminated by the end of the year. It will be replaced with an ‘industrial cooperation agreement’ that would seek to maintain ‘their successful cooperation and plan to continue to benefit from joint synergies in the future’ - but it would be conducted ‘on an arm’s length basis’.
For its own part, the benefit of ‘moving ahead at full speed’ for Volkswagen AG is the additional investment it needs to continue moving forward with its strategy of electrifying everything that moves. Its own hugely ambitious plans are playing out on a vast scale, and while there are question marks about listing its chief source of operating profit during less than favourable market conditions, a successful IPO would yield the considerable funds it needs to prepare for life after 2035. Whether or not that comes to pass remains to be seen. Either way, the ‘Intention to Float’ notice is the first step toward an entirely new era for both firms.
If as many reports suggest we are entering a period of economic turmoil, I'm not sure I'd be wanting shares in a luxury car maker. While I would not expect an economic slump to be as detrimental as it may be to say Aston Martin, I do feel that the lower end of their market may see significant reductions in volume.
Win-win.
I'm not sure why this is a landmark IPO as Porsche has already floated once.
It's a curious one.
Ignoring the VW / Porsche family long running shenanigans, it's a really weird time to float (with markets potentially going into a period of zero rate support). Existing investors are appearing to question the rationale of the timing.
And if anyone likes a history lesson, of how markets can work against you, here's an abstract on the last time Porsche and VW engaged in financial shindigs.
https://internationalbanker.com/history-of-financi...
If as many reports suggest we are entering a period of economic turmoil, I'm not sure I'd be wanting shares in a luxury car maker. While I would not expect an economic slump to be as detrimental as it may be to say Aston Martin, I do feel that the lower end of their market may see significant reductions in volume.
It's a curious one.
Ignoring the VW / Porsche family long running shenanigans, it's a really weird time to float (with markets potentially going into a period of zero rate support). Existing investors are appearing to question the rationale of the timing.
And if anyone likes a history lesson, of how markets can work against you, here's an abstract on the last time Porsche and VW engaged in financial shindigs.
https://internationalbanker.com/history-of-financi...
The warning for me is that they don't seem to be targeting top end investment but more what tends to be referred to as 'mug money'.
Plus, Porsche may sell some sports cars but their true business is selling VW SUVs with Audi drivetrains so why would you want financial exposure to a company that is utterly beholden to another?
I'm sure more will come to light to make it clearer but at the moment it just has a whiff about it to me.
If as many reports suggest we are entering a period of economic turmoil, I'm not sure I'd be wanting shares in a luxury car maker. While I would not expect an economic slump to be as detrimental as it may be to say Aston Martin, I do feel that the lower end of their market may see significant reductions in volume.
If as many reports suggest we are entering a period of economic turmoil, I'm not sure I'd be wanting shares in a luxury car maker. While I would not expect an economic slump to be as detrimental as it may be to say Aston Martin, I do feel that the lower end of their market may see significant reductions in volume.
I'd also be wary of comparisons with Aston which was a and remains a broken pile of debt that had been sucked dry by robber barons and can't generate enough cash revenue to finance its debt pile safely. Conversely, Porsche is a cash generating behemoth with little debt to worry about at a time when cash generating companies are king.
What I do t quite get is the low quality of the potential investors being mentioned in the article. I can't fathom the reason for going low with such a robust and cash generating business.
I think the current economic climate works very much in their favour; it's a proven, profit-making enterprise (rather than just bluster like so many startups). It's almost akin to buying gold as a safety.
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