The Volkswagen Group says its marque sports car brand Porsche is worth between $70 billion and $75 billion, according to paperwork filed with financial regulators. The company says it will use investors’ money in two key areas: software and electric vehicles. If Volkswagen gets that much, it could become Europe’s third-highest IPO on record.
This target is down from earlier estimates that went as high as $85 billion, but Volkswagen is going ahead with the Porsche stock offering despite a tumultuous market and the recent departure of Herbert Diess as Volkswagen Group CEO. Current Porsche Chairman Oliver Blume took over Diess’ former role on Sept. 1, but is remaining in his position at Porsche through the IPO.
Per the IPO prospectus released Monday, Volkswagen plans to float the price of Porsche AG preferred shares somewhere between €76.50 and €82.50 ($76.58 and $82.59 at the time of this writing). That would lead to an overall valuation between $70 billion and $75 billion.
That higher-end valuation is an interesting figure, as Automotive News notes that it’s awfully close to the Volkswagen Group’s total market value of €88 billion. Many are also comparing the Porsche IPO to Ferrari’s recent IPO, although Ferrari is notably one of the few companies with higher profit margins per vehicle than Porsche. The middle of Porsche’s valuation range would put Porsche’s value at 10.2 times its earnings before interest, tax, depreciation and amortization (EBITDA), while Ferrari’s value was 23.1 times its EBITDA.
This isn’t the easiest time for the Volkswagen Group as a whole, with the company facing parts and materials shortages, high energy costs, high inflation, rising interest rates, a war in Ukraine that’s directly affected some of Volkswagen’s facilities and suppliers and other fallouts from the COVID pandemic—all on top of the recent turnover in Volkswagen’s CEO office.
Despite all of this, Porsche has been doing rather well, with Automotive News reporting that Porsche is on target to make some €39 billion this year, with a return on sales of as much as 18%, up two percentage points from last year. Blume recently said they can aim for even higher profit margins than they already enjoy as EVs become less expensive to manufacture over time. Mind you, Porsche already makes an average of over three times more on every car sold than BMW or Mercedes-Benz. The IPO prospectus reiterates this, saying that Porsche wants to grow the highest end of its product portfolio, with cars that easily option up to more than €200,000 and more limited-run special editions.
Given that, the two areas that Volkswagen wants to channel Porsche’s IPO funds toward to make sense. EVs, because it’s the direction of the overall industry and something Blume’s already found success with at Porsche, and software, which Volkswagen was so behind with under Diess’s leadership that sources inside the company say it led to Diess’ ouster. Volkswagen expects to make somewhere between €18.1 billion and €19.5 billion from the IPO, which should give a healthy boost to both.
Yet it’s that recent appointment of Blume to Volkswagen Group CEO that’s made some investors hesitant. While he’s been successful at Porsche, the fact that he’s staying on as Porsche CEO through the IPO has made some potential investors worry as to how independent Porsche will be within the wider Volkswagen Group. After all, the Porsche-Piëch family that controls 53% of the Volkswagen Group’s voting shares is set to buy 25% plus one of the Porsche AG common shares with voting rights, effectively buying themselves a minority blocking stake in the company.
Per the prospectus, the subscription period for private and institutional investors in Germany, Switzerland, Austria, France, Spain and Italy will run Sept. 20-28. Trading of Porsche shares through the Frankfurt Stock Exchange will start Sept. 29. Fittingly, the company plans on offering 911 million shares of Porsche AG including 455.5 million preferred shares and 455.5 million ordinary shares. Its ticker symbol? P911, of course.
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