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The IPO of German engineering firm Porsche has been announced for this year. It is highly anticipated and some reports in the media suggest it could end up being one of the biggest IPOs in German stock market history.

Here we bring you five important factors to consider before you call Frankfurt to subscribe for shares!

Where does Porsche stack up in luxury motor manufacturing?

Porsche is currently a profitable company, with sales and profits both up for at least three consecutive years. It generated over €33bn in sales and €4bn in pre-tax profits in 2021. It has demonstrated its ability to keep growing despite major headwinds and reported record delivery numbers in 2021. Around 25% of all cars sold in 2021 were electric, and while management have said they will always offer drivers models with combustion engines, it plans to counter this by making its balance sheet CO2 neutral and by investing in plants to make new ‘e-fuels’.

Who owns Porsche right now?

Porsche is currently owned by Volkswagen Group, which acquired a 49.9% stake in Porsche AG in 2009 before it went on to buy the rest of the business a few years later. It is important to understand the overall shareholder structure of Volkswagen Group. “Volkswagen is controlled by an entity named Porsche Automobil Holding SE (Porsche SE), which owns a 31.4% stake in the business, but over half of all the voting rights,” noted Atlantic Capital Markets in a recent research note. “Porsche SE is also a listed entity. All of Porsche SE’s ordinary shares are in the hands of members of the Porsche and Piëch families, although it does also have preference shares that are roughly split 50/50 between foreign institutional investors and German-based private investors.” Ultimately, the Porsche family control Volkswagen through Porsche SE and Volkswagen own Porsche AG. It is Porsche AG that is going to list.

What is the IPO strategy?

Volkswagen have already said the plan is to divide the stock of Porsche AG, with a split of 50% ordinary shares and 50% preference shares. There will then be up to 25% of the preference shares listed as part of the IPO, which would mean just 12.5% of its total shares will be floated. While the ordinary shares will have voting rights, the preference shares will not – meaning those that invest post-IPO will own a stake in Porsche AG, but have no say over how it is run.

The ordinary shares will not be listed and will remain in the hands of Volkswagen, meaning it will remain the controlling shareholder after Porsche AG is listed and continue to be consolidated into its own financial statements. However, Porsche SE – controlled by the Porsche and Piëch families – will buy just over 25% of the ordinary shares in Porsche AG at a 7.5% premium to the eventual IPO price.

“It’s important to note that any interested investors must understand that Porsche AG will remain firmly under the control of both Volkswagen and Porsche SE, the free float will only include a fraction of its overall shares and offer no voting rights,” said Atlantic Capital Markets.

How much is Porsche worth at the moment?

Media reports suggest Porsche AG could target a valuation of up to €90bn, which would make it one of Germany’s largest-ever listings. However, this is just media speculation and a clearer valuation will be sought closer to the date.

If we use the €90bn valuation and work on 12.5% of its overall shares being floated, the IPO would raise somewhere in the region of €11bn. Volkswagen has said it plans to pay out 49% of total gross proceeds from the listing to shareholders via a special dividend, with the rest being used to invest in the business and drive its new strategy.

Why list Porsche in 2022?

Volkswagen have said they were exploring the potential of spinning-off Porsche through their own IPO in February 2022, stating a listing ‘would provide more entrepreneurial freedom to Porsche AG, while crystalizing the company’s value for Volkswagen shareholders’.

Volkswagen also believe listing Porsche would help fuel the next step in Volkswagen’s transformation from brand manufacturer to a vertically integrated mobility group. This should (if all goes to plan) help provide additional flexibility to accelerate the group’s new auto strategy that will see it invest heavily in areas like software for autonomous driving, battery technology and recycling, and charging infrastructure.

“Volkswagen is hoping a spin-off can not only raise some cash needed for its ambitious investment plans, but also allow Porsche to realise its full value,” Atlantic Capital Markets told investors last week. “Volkswagen itself is only currently valued at €92bn, similar to the anticipated valuation that Porsche AG will achieve on its own.”

Related

Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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