Volkswagen To Announce Initial Stock Offering For Porsche

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Volkswagen will use the proceeds from the stock sale to finance money for its drive toward electrification, and investors will obtain a piece of an iconic brand similar to Ferrari.

Porsche’s final listing price was set by Volkswagen Group at 82.50 euros per share, valued at 75 billion euros ($73 billion), in an effort to demonstrate that the venerable sports car manufacturer can withstand the current capital market downturn and complete Europe’s biggest IPO in ten years.

The final list price, which is at the upper end of the initial 76.50–82.50-euro range proposed to investors, was accepted at a meeting of VW’s supervisory board and executive committee late on Wednesday. When the Frankfurt stock market opens on Thursday, Porsche will celebrate its first trading day.

The 911 manufacturer’s IPO is a risky foray into the public markets, which have been mostly closed to initial public offerings (IPOs) for much of the year as businesses have been reluctant to seek fresh listings due to the European energy crisis, rising interest rates, and record inflation. The sale will enable Volkswagen to raise money for its push toward electrification, and investors will have ownership of a sentimental brand similar to Ferrari NV, which successfully split from parent company Fiat in 2015.

According to Jefferies analyst Philippe Houchois, “if you can carry off an IPO in such a challenging environment, it underlines the attractiveness of the business.” Porsche is a seasoned, well-known company that doesn’t require cash raising. It’s extremely fantastic that you were able to launch it as a fully functioning firm.

According to data collated by Bloomberg, companies raised fewer than $10 billion in IPOs this year through August, a decrease of 83 percent in proceeds from the same period last year. According to the data, Porsche’s listing is anticipated to be the biggest in Europe since miner Glencore Plc raised about $10 billion in a London IPO in 2011.

The share price values Porsche at a level that is somewhat close to VW’s overall market capitalization, which includes, among other things, the Audi, Skoda, Seat, and VW brand. Despite its strong marketing, the listing has nonetheless drawn criticism for its intricate structure.

Volkswagen kept a 75% ownership stake while dividing Porsche’s share capital into voting and non-voting shares equally. Only non-voting shares, or around 12.5 percent of the total share capital, are being placed on the public market, with four cornerstone investors receiving the majority of these shares. Together, the Qatar Investment Authority, the sovereign wealth fund of Norway, T. Rowe Price, and ADQ have agreed to commit up to 3.7 billion euros of the IPO.

The remaining 12.5% of the total available shares will be acquired by VW’s top shareholders, the wealthy Porsche and Piech families, through their investment firm Porsche Automobil Holding SE. The family already holds a majority of voting shares in VW (53%), and as part of the terms of the IPO, they will also receive 25% plus 1 voting share of Porsche AG for a total price of €10.1 billion.

Porsche SE would primarily finance the acquisition with 7.9 billion euros in borrowed capital, purchasing shares in two tranches beginning next month with the second purchase anticipated in January, following a special dividend payment by VW.

The family possessed half of Porsche and all voting rights up until 2009, but after their takeover attempt of the German automaker failed, they were forced to sell the sports-car division to VW. With the IPO, the family regains control over a long-out-of-reach asset: they are granted a veto-proof majority on the supervisory board of the sports car manufacturer, and their position as a major stakeholder in VW strengthens that influence.

Porsche announced in July that it was aiming for revenue of up to 39 billion euros ($38 billion) and a return on sales of up to 18 percent, up two percentage points from previous year. Over the long term, returns are expected to rise above 20%. Although Porsche has greatly expanded its inventory in the last ten years by including well-liked crossovers like the smaller Macan, the four-door Panamera, and the battery-powered Taycan, the firm is still best recognized for its 911 model.

In addition to the complex ownership structure, some investors also have concerns about governance. Oliver Blume, the CEO of Porsche, was recently promoted to CEO of Volkswagen and kept his position there.

Porsche’s market valuation should be 80 billion euros, just below luxury firms but above other automakers, according to a Bernstein estimate.

Porsche still displays higher volatility in profits growth and margin profile when compared to luxury rivals, according to European auto expert Daniel Roeska. Porsche has only greatly increased numbers by introducing new formats, and this does not appear likely in the ensuing years.