The European stock market could soon experience a superlative Initial Public Offering (IPO). Despite the gloomy stock market environment, Volkswagen is sticking to its plan to put Porsche AG on the stock market. In the investment banking scene, the sports car manufacturer is said to have a valuation of between EUR 60 and EUR 80 billion. Some analysts even consider EUR 100 billion to be realistic. If Volkswagen were to sell off a quarter of the subsidiary, the IPO volume could therefore amount to as much as EUR 25 billion. This would put the debut almost on a par with Saudi Aramco. In 2019, the oil and gas group had pulled off the largest IPO in history to date. At VW's headquarters in Wolfsburg, preparations are in full swing. If everything goes smoothly, Porsche AG should mutate into an exchange-listed company before the end of this year.
Porsche Automobil Holding is literally in the passenger seat in the plans outlined. Then the core investment of this holding company is a 53.3% package of Volkswagen ordinary shares. In turn, the Porsche and Piëch families set the tone among the shareholders of Automobil Holding. They hold 100% of the ordinary shares, which carry voting rights but are not listed on the stock exchange. The IPO could give the generation of heirs direct access to Porsche AG again. Automobil Holding would like to acquire 25% plus one voting preferred share in the sports car maker directly from Volkswagen. The company could offset the price of this package with the planned special dividends from Volkswagen. The industry giant would like to distribute 49% of the total IPO gross proceeds as a special dividend.
There are still some question marks behind this scenario. In particular, a further deterioration in the stock market environment could throw a spanner in the works of VW's management. By contrast, Porsche Automobil Holding can firmly count on the regular profit share for 2021. Provided Volkswagen's annual general meeting approves the management's proposal at the annual general meeting on May 12, a transfer of more than EUR 1 billion is on the cards. The significant increase in the distribution is made possible by strong earnings growth at Volkswagen. This in turn is also likely to have given Porsche Automobil Holding a jump in profits last year. Analysts on average assume that the DAX member increased its earnings per share by more than half (see chart). Investors will find out to what extent the consensus is right on March 29. That is when Porsche Automobil Holding will present its financial statements for the past year at a media and analysts' conference.
Shortly before this important event, Leonteq launched two softcallable barrier reverse convertibles on the investee company. The CHF-denominated version comes with a guaranteed coupon of 10% p.a.. For the EUR-denominated alternative, the quarterly payout is half a percentage point p.a. more. The barriers are fixed uniformly at 65% of the initial price. As long as the underlying does not fall to or below this level, nothing stands in the way of the maximum return corresponding to the coupon. If the barrier is breached, the partial protection expires. The investment would then be exposed to the full risk of Porsche Automobil Holding. Please also note the soft call feature. It allows early termination and redemption of this issue. Conclusion: A continuation of the sideways movement that has been going on for a good year is enough to achieve an attractive return with these barrier reverse convertibles. Even if Porsche Automobil Holding leaves the chart trend to the downside, this opportunity would not necessarily be passé.
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