Complicated Roadmap to Porsche’s IPO as VWs Planned

Like many of Volkswagen’s major announcements, the German group’s leadership, out of control of the timing, confirmed that it was finally planning to list part of the company’s crown jewel, Porsche.

Instead, the feed drips on rumors from VW’s many stakeholders – including a secretive family shareholder, powerful unions, the German state of Lower Saxony and 12 established auto brands independent management – has forced the automaker to hastily issue a statement that follows the stock market disclosure rules, just as Russia moved forces into Ukraine.

However, neither a fake news report nor the prospect of war could dampen the case of the liberation of Porsche, which supplies only 300,000 of the 9 million VW Group sells each year, but accounts for 1 /4 of the firm’s profits. VW stock initially rallied nearly 10% as markets enjoyed a 20 billion euro initial public offering of the historic brand, which would easily eclipse a $12 billion listing. la in 2021 by electric carmaker Rivian.

As VW CEO Herbert Diess emphasized to reporters last year: “Porsche shows in a league of its own.”

“The luxury carmaker has roots intertwined with VW, showing” how an automotive icon can remain a brand of unsurpassed sport and performance while repositioning itself in the direction of VW. electrification,” he added.

In contrast to VW, which flooded the market with inefficient electric cars, Porsche focused on excellence.

An employee of the German luxury car company Porsche inspects the Porsche Taycan, the company's first all-electric vehicle.

A Porsche Taycan. Last year, the luxury carmaker sold more all-electric models than its older 911s © Thomas Kienzle / AFP / Getty Images

Following the mantra of former boss Ferry Porsche, who told his engineers that the company “can and can build anything, as long as it is better than its competitors”, the brand The brand best known for its engine squeal has managed to sell more Last year, Taycan models compared to its 911 line, delivered 41,000 vehicles to customers, surprising the executives themselves. by Porsche.

An electric Macan sport utility vehicle will be launched but it won’t be until the second half of 2023, with Porsche chief executive Oliver Blume keen to maintain last year’s money-generating petrol and diesel models swore that, unlike VW, “Porsche will always offer combustion engines”.

As a result, Porsche is almost alone among the legacy automakers in maintaining profit margins above 15% and growing revenue by double digits while accelerating into the electric age.

However, investors did not reward VW for ownership of Porsche. While the brand is estimated by analysts to be worth between 100 billion euros and 200 billion euros, Diess, who made it her mission to take on Tesla in the electric race by pledging 52 billion euros to develop battery-powered car maker, has seen his company’s market value fall far behind the 200 billion euros he had long hoped to reach, never mind the $830 billion valuation of the American adversary.

According to a relative with the Austrian clan.

The family is still nursing a bruise after being forced to give up ownership of Porsche following the failure of a daring attempt to devour VW in 2009. The attempt was aborted, an accident of the global financial crisis. , led to a complicated reverse takeover, in which Porsche became part of VW, although it continued to be managed by allies of the eponymous family.

However, leaked details of the IPO plans, which still need to be approved by VW’s board, have led to fears that the Wolfsburg-based company will break the listing, in a not-so-different manner. with the partial floating of their Traton truck branch. in 2019, where it maintains nearly 90% shares and is below the list price.

Porsche Pavilion, the car company's showroom, in Wolfsburg, Germany

Porsche Pavilion, the car company’s showroom, in Wolfsburg. Porsche’s IPO will be one of the biggest in recent German history © Bildagentur-online / Alamy

“VW doesn’t have a perfect track record when it comes to mergers and acquisitions,” said Daniel Schwarz, Stifel auto analyst, who added that investors have can worry that the company, which already generates 15 billion euros in free cash flow per year. , which could take away the proceeds of costly projects to appease unions and secure jobs.

A protracted conflict with workers late last year led VW to commit to building another factory near its Wolfsburg headquarters, where it had promised to house a research branch designed to take on Tesla. .

A person close to VW’s unions, which actually control the company’s supervisory board due to its loose alliance with the state of Lower Saxony, confirmed that the automaker’s workers’ council would seek to protect jobs and future German factories before approving any Porsche listings. .

In addition, details leaked from the draft agreement for the IPO plan to the creation of the much-criticized ownership and governance structure, not unlike the structure that has kept many investors from buying into VW.

Porsche shares will be split equally into common shares and non-voting preferred shares, after which 25%, half ordinary and half preferred, will be floated at an expected valuation from €80 billion to €90 billion for the entire business.

This led to one of the largest IPOs in recent German history. But the Porsche-Piëch family investment vehicle can buy all of the common stock offered for sale, according to people familiar with the matter, leaving just 12.5% ​​of Porsche’s shares at free. circulating and threatens to create a stock in which no major investor can make a substantial stake.

People close to VW management also warn that there is still a chance the IPO will be canceled, due to internal conflicts or an unfavorable market environment. Notably, no lender has been officially appointed to carry out the transaction, according to an involved bank.

But as one VW watcher quipped, the current plans look uncanny like the old Porsche, essentially a closed shop to outside investors. They added that the brand was “in danger of a return to the future”.

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