The Porsche automaker is not only a piece of industrial history, it is an icon of German engineering and the brand has been a cult object for decades. Back in 1931, Ferdinand Porsche, who later designed the VW Beetle, laid the foundation for the eponymous sports car manufacturer that sets the pulse of car enthusiasts around the globe racing. But it is not only horsepower enthusiasts who are visually and acoustically enthralled by the luxury cars from Stuttgart; the unique Porsche sound is also heard on the capital market. The sports car maker is hitting the stock market at full throttle.
But wait, why go public? Porsche shares have already been listed for a long time and were even promoted to the DAX 40 last year. A perfectly legitimate question that requires an explanation. Porsche, which is included in the German share index, is a holding company. This company, which is controlled by the Porsche and Piech families, holds the main shareholdings. At the very top is Volkswagen. Porsche Holding is the largest single shareholder, holding 53.3 percent of Volkswagen AG's ordinary shares and 31.9 percent of its subscribed capital. VW, in turn, controls more than half of the shares in Porsche AG, i.e. the car division.
This complex corporate web dates back to the years 2007 to 2009, when Porsche, true to the motto "David against Goliath," attempted to take over Volkswagen. First, the Zuffenhausen-based company crossed the 30 percent threshold at VW in 2007 and submitted a mandatory offer. In the course of this, Porsche Automobil Holding was founded, in which in turn the Porsche and Piech families involved bundled their shareholdings in the Porsche sports car manufacturer and the VW car group. After Porsche Holding had already acquired more than half of VW's shares in 2009, the company lost its way: Porsche, which was heavily indebted at the time, had to abandon its takeover plans in the wake of the financial crisis, whereupon VW in turn launched a "counterattack". Europe's largest automaker initially secured just under half of the sports car manufacturer, and since 2012 the Swabians have now belonged entirely to Volkswagen.
With the IPO now on the horizon, the Wolfsburg-based company wants to sell off its pearl of profit within the group. With an operating return in the region of 15 percent, the sports car manufacturer is not only the most profitable division of the total of nine car brands within VW, but the 911 manufacturer also regularly comes out on top in international comparisons. However, the management around Porsche CEO Oliver Blume is not satisfied with this. In the medium term, the carmaker is looking at a return target in a range between 17 and 19 percent, and in the long term it is even aiming to exceed the 20 percent mark. The first half of the year showed that such high returns are possible in the automotive sector: Porsche increased its operating margin by two and a half percentage points to 19.4 percent, thus already exceeding its medium-term target.
Turbo-charged growth and increasing profitability go down well with investors. It is therefore not surprising that the enthusiasm for an IPO of the luxury car manufacturer was great right from the start. After just a few hours, the issue was oversubscribed several times over, and this despite the fact that Porsche almost completely exhausted the valuation of 60 to 80 billion euros that investors had previously considered appropriate. This was no problem for major investors such as Qatar, a Norwegian oil fund, the U.S. asset manager T. Rowe Price, and the Abu Dhabi sovereign wealth fund, who had already made commitments in advance for around 40 percent of the total issue volume. The price range for the new shares was fixed at 76.50 to 82.50 euros, which corresponds to a company value of 70 to 75 billion euros. This makes Porsche's IPO the largest in Europe in five years and in Germany even in more than a quarter of a century.
But even though the sports car manufacturer is traded on the stock exchange, shareholders have no influence on the company's fortunes or strategy. Indeed, only non-voting preferred shares will be issued As the 820-page stock exchange prospectus shows, Porsche Holding, on the other hand, will acquire 25 percent plus one of the voting common shares in the newly listed Porsche AG in two tranches. The remaining shares will remain in the VW Group, giving the owning families Porsche and Piech control of the group. This is a clever move, as important decisions will require the approval of Porsche Holding in the future. In general, there is a lot of potential in the automaker. For example, Porsche has already set the course towards the "car of the future". Instead of turbo-charged horsepower, the focus is now on kilowatts as a unit of measurement. By 2030, 80 percent of new sales are to be e-cars. By way of comparison, last year the figure was just under 14 percent. Porsche currently has only one fully electric model in its range, the Taycan, but the next model series, the SUV Macan, is soon to be electrified. A large electric SUV is also planned.
Not everything is all sunshine and roses at Porsche. For example, some investors are bothered by Oliver Blume's dual role as CEO. After the IPO, he will head both Porsche and VW. It is certainly no easy task to synchronize the success of two such complex companies in a rapidly changing automotive world. Moreover, the IPO is taking place in the midst of geopolitical conflicts, an energy crisis and the threat of recession. This explosive mixture has already been throwing the financial markets out of sync for months. On top of that, as shown above, the capital market is only a financier for Porsche; there is no right of co-determination due to the sole issue of preferred shares.
On the other hand, Porsche should certainly enrich the share price. The premium car brand is highly profitable, growing dynamically and pursuing a forward-looking strategy. According to its listing in Frankfurt, the new Porsche share could even soon be included in the DAX, based on the expected free float market capitalization of 8.7 to 9.4 billion euros. With the so-called fast-entry rule, it would be possible to promote the stock market fresher to the blue-chip index as early as December. This in turn could have a positive effect on the share price, as it would not only increase the attention of international investors, but also the demand for the shares of passive funds. Leonteq will allow investors to invest in the debutant right from the first trading day on September 29, 2022 with various structured products.
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