It looks increasingly like Porsche is going to officially announce its IPO in Frankfurt next week. The closely-watched listing could value the car manufacturer at over $85 billion. It would make it one of the biggest IPOs in European stock market history to date.
The sports car brand is currently owned by Volkswagen Group, and the company is currently taking pre-orders on the shares, which are already looking over-subscribed. The IPO is believed to have already been approved by the company’s supervisory board.
It’s a punchy move by Volkswagen, coming at a time when neither the markets and the European economy are looking that healthy. But some pretty big hitters are known to have shown an interest in taking a slice of the action, among them retail stockbroker T Rowe Price and the Qatar Investment Authority. If Porsche really does move to list this autumn, it will mean that a lot of the big players are already on board to the tune of at least $60 billion.
Porsche IPO road show
The IPO roadshow has been quietly picking up bids for its shadow book and there are hopes in the German brokerage community that the IPO will jump start the dormant IPO market in Frankfurt at least. This is a marquee brand which will attract some big ticket investments, including from investors who don’t usually back an IPO of this nature.
Bear in mind however that the deal is being structured in such a way to make sure that the listed stock could not be used as the basis for a takeover of Porsche. The shares will not carry voting rights. VW will also continue to control the majority of the company.
Sports car IPOs have a habit of attracting a lot of interest, as we saw with the Ferrari listing in 2015. But these sorts of deals can provide investors with a bumpy ride over the short term. Ferrari, in more benevolent financial conditions, saw its stock fall 41% during its first four months of trading. It has since recovered these losses. Such behaviour points to larger investors exiting a matter of months after the listing, perhaps after they entered under pre-IPO conditions.
Does Volkswagen need the cash?
Volkswagen does not seem to have much patience: it could do with the cash. It is still emerging from under the cloud of the Dieselgate scandal, which has damaged its brand in North America. It is having problems selling into the US SUV sector. On top of that it knows it needs to compete against Tesla in the growing EV market. On top of this, the capital can also help to fuel Porsche’s own electrification strategy. It wants over 80% of its cars sold to be electric by 2030. Already over 40% of Porsches sold are electric.
One VW shareholder told Reuters recently that the IPO is unlikely to create value for VW over the long term, but it looks to us like VW is not going to sit and wait when it has this low hanging fruit it can capitalise on. What this will do to the VW stock price, currently down 19% over the last six months, will also be interesting.
