GERMANY: After the automaker announced it was aiming for a valuation of up to 75 billion euros ($74.84 billion) for sports car brand Porsche (PSHG p.DE), in what could be Europe’s third largest IPO ever, Volkswagen’s (VOWG p.DE) shares slightly increased on Monday.
Even if the stocks of rival luxury automakers like Ferrari (RACE.MI) and Aston Martin [RIC:RIC: ASTON.UL] have fallen this year amid the turmoil in European stock markets, Porsche hopes to attract investors with its strong brand and high operating margins.
When compared to other German automakers like BMW (BMWG.DE), which is valued at 49 billion euros, and Mercedes-Benz, which is valued at 61 billion euros, the valuation of 70–75 billion euros, which was revealed on Sunday, is much higher. It falls only short of some investors’ predictions of up to 85 billion euros, though.
Porsche AG’s Chief Financial Officer Lutz Meschke stated in early September that although the IPO might still be cancelled before trading begins on September 29, this would only occur in the event of additional “serious geopolitical difficulties.”
Volkswagen’s shares rose 3% in premarket trade, but by 0838 GMT, they had only increased by 0.4% from Friday’s close. Analysts have predicted that Volkswagen’s valuation might increase as a result of the listing by showing the value of just one of its luxury brands.
Porsche Holding SE, the largest shareholder in Volkswagen, saw its shares rise 3.23%, leading Germany’s DAX blue-chip index (GDAXI).
On Sunday evening, Volkswagen said that it will price Porsche AG’s preferred shares at a range of 76.50 to 82.50 euros per share.
On Monday afternoon, a prospectus including more information on the IPO is anticipated to be released. Porsche intends to issue preferred shares with no voting rights to investors, representing up to 12.5% of Porsche’s total share capital.
Almost 40% of the whole share capital is already claimed by cornerstone investors: In addition, T. Rowe Price (TROW.O) and Norway’s sovereign wealth fund will buy shares worth 750 million euros, according to a statement released on Sunday.
Qatar Investment Authority, Volkswagen’s third-largest shareholder, has committed to purchase 4.99% of the company. ADQ of Abu Dhabi will purchase 300 million euros worth of shares.
“Investors are lining up, therefore the Porsche IPO is probably going to be successful. If the Porsche IPO is successful, one may envision listing other divisions of Volkswagen, like Audi, on the public market,” QuantCo’s Arndt Ellinghorst, a data analytics expert, remarked.
Porsche AG stock has been compared by analysts to Ferrari (RACE.MI), which has a 38 billion euro market valuation but an operating margin of 24% as opposed to Porsche’s 17–18%. The German automaker is far ahead in electric vehicles and aims for a 20% margin.
However, considering that Porsche SE owns a sizable portion of the Volkswagen Group and Porsche AG’s Chief Executive Oliver Blume manages both the sports car maker and the Volkswagen Group, some investors have expressed caution due to the complex governance issues at the company.
Private investors in Germany, Austria, Switzerland, France, Italy, and Spain will be able to purchase shares during the subscription period, which is anticipated to last from September 20 through September 28.
By Volkswagen’s agreement with Porsche SE earlier in September, 25% plus one ordinary share in the sportscar brand—which does have voting rights—will be transferred to Porsche SE at the price of the preferred shares plus a 7.5% premium.
The deal will bring in between 18.1 billion and 19.5 billion euros overall.