Skewed Porsche IPO shows luxury brands’ power of attraction

German automaker Volkswagen is banking on the power of attraction of its luxury brand to push the IPO of its luxury car manufacturing subsidiary Dr. Ing. hc F. Porsche AG, known simply as Porsche to millions of fans. The hope is that the overwhelming prospect of owning a piece of automotive luxury will outweigh the pronounced tilt toward developer families in the structure of the IPO.

Not that VW makes it a secret. In initial meetings with portfolio managers, Bloomberg reported, the German automaker touted Porsche’s IPO as an opportunity to invest in a company that combines the automotive manufacturing prowess – and profitability – of Ferrari. with the luxury value of brands like Louis Vuitton and Cartier.

As part of the listing, 911 million Porsche AG shares – a clear nod to its best-selling 911 sports car model – will be split into 455.5 million preferred shares and 455.5 million shares. ‘ordinary actions. Only preference shares, without voting rights, will be listed.

The ordinary shares, which carry voting rights, will be sold to the Porsche-Piech families, whose family holding company Porsche Automobil is VW’s largest shareholder. Indeed, the IPO will give ordinary investors 12.5% ​​of Porsche’s capital, with no say in management.

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The Porsche-Piech families, on the other hand, who lost control of the company in 2008 after a botched takeover of VW, which backfired and ended up buying Porsche for around 8 billion euros, have a lot to win. For starters, they will get a blocking stake of 25% plus one, giving them considerable control over management decisions and the power to block board resolutions.

And to make the deal more pleasant, they wouldn’t even have to find the money to pay their allowance. VW plans to pay a bonus of 911 million euros (another tip of the hat to the Porsche 911), which should significantly reduce the amount families will have to raise to buy their allowance.

The IPO could raise up to 10.6 billion euros ($10.5 billion), making it the biggest stock market listing in Europe since 2011 and likely the third largest in Europe.

This would certainly be good news for VW, which hopes to raise between 18.1 and 19.5 billion euros through the sale of shares. It would also value Porsche almost on par with VW, which will help VW raise additional capital to pursue its electric ambitions.

Although Volkswagen has both luxury brands like Porsche, Lamborghini and Bentley under its umbrella, as well as mass brands like Volkswagen and Skoda, and the two-wheeler brand Ducati (VW, Skoda and Ducati are all on the Indian market), its ability to raise capital is somewhat limited by the lackluster performance of its stock. VW stock was trading at a PE multiple of 5.4 (as of September 19). Compare that with Tesla’s incredible PE of 109.64 (as of September 19), or even Maruti Suzuki’s PE of 63.27!

Although VW was the world’s largest auto company in 2021 by revenue and second by production numbers, by market capitalization it is fourth behind Tesla, Toyota and BYD. But the three most valued rivals are all far ahead in the electric race. Tesla and BYD are pure electric vehicle makers while Toyota is the leader in hybrids.

VW, by comparison, only made 6% of its electric car sales. Porsche, on the other hand, is well ahead on the electric front, with electric vehicles expected to account for 50% of sales by 2025 and 80% by 2030, making it Tesla’s closest legacy challenger. Faster electrification will further boost the value of Porsche (Tesla is valued at over $968 billion), helping VW raise funds to convert its old automotive business to electric vehicles much faster.

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