Porsche's IPO Boosts Volkswagen Stock!

Porsche's IPO boosts Volkswagen stock! This Sunday, the Volkswagen management board just validated the price range of future Porsche shares. A range that should allow the German company to count on a capitalization of between 70 and 75 billion dollars. That's more than most major auto companies. Let's see together what this could change in the automotive market.

Porsche: A valuation between 70 and 75 billion dollars.

If some market players were rather counting on a valuation close to 85 billion dollars, the valuation of Porsche should ultimately be between 70 and 75 billion dollars. A valuation that would exceed, from its introduction, that of other automotive giants. 

By way of comparison, the valuation of BMW is 49 billion dollars while that of Mercedes-Benz is 61 billion. This range should also make Porsche a more highly valued company than Stellantis and Renault combined. The numbers put forward could make Porsche the third-biggest IPO in European history.

This level of valuation is also relatively close to that of Volkswagen, which displays, at the time of writing these lines, a valuation of 88 billion dollars. For this initial public offering (IPO), the share price should be between €76.50 and €82.50.

Good to know: Porsche Holding SE holds almost a third of the share capital of Volkswagen SE, which holds 100% of the shares of Porsche Holding Stuttgart GmbH. According to German stock company regulations, Porsche Automobil Holding SE is a “related party” of Volkswagen AG and Porsche Holding Stuttgart GmbH.

The terms of the IPO!

Automaker Volkswagen plans to place up to 12.5% ​​of Porsche's capital with investors in the form of preferred shares. These will not carry voting rights.

For the IPO of Porsche, up to 114 million preferred shares will come from the holdings of Volkswagen AG. In detail, these 114 million shares will be distributed as follows:

• Approximately 99 million preferred shares

• Approximately 15 million additional preferred shares to be able to cover the over-allotments.

Please note that the preference shares of Porsche AG will become tradable as of September 29, 2022.

If the IPO is not yet final, it is difficult to imagine that it could be canceled again before the start of trading on September 29. In this regard, Lutz Meschke, Chief Financial Officer at Porsche AG clarifies that cancellation would only occur in the event of new serious geopolitical problems.

 Following the IPO, Volkswagen AG is expected to convene an extraordinary general meeting in December. The latter should then propose to the shareholders the distribution of a special dividend. New details should be published this Monday afternoon about the future IPO.

Porsche IPO: Enthusiasm prevails!

Even before its introduction, there seems to be excitement surrounding the Porsche stock. Many investors have already communicated their willingness to participate in the operation. Thus, nearly 40% of the share capital would have already been claimed. The Qatar Investment Authority group, Volkswagen's third largest shareholder, should buy back 4.99% of the preferred shares.

The Norwegian sovereign wealth fund and T. Rowe Price are committed to buying 750 million euros worth of shares according to the press release published by the Volkswagen management board. For its part, the company ADQ should buy for 300 million euros of Porsche shares. In the days to come, other entities could also communicate their intentions.

A positive impact on the Volkswagen share?

This announcement had, before the opening of the market, a positive impact on the Volkswagen's share. After a close from 145 euros last Friday, the asset rose before the market opened. Up to more than 3%, to come to exceed 147 euros. But in a gloomy context of the risky markets at the start of the week, the asset then corrected. 

At the time of writing, Volkswagen shares are trading at €144.90. It just dropped 0.32% on the day
Within the German DAX stock index, shares of Porsche Holding SE posted the second strongest rise in the index. Among 40 companies. Since the opening of the session, the asset is up 1.45% while the index is down 0.48%.

In the longer term, the IPO of Porsche could obviously have a positive effect on Volkswagen's share price. But above all, set the tone for a new strategy for Volkswagen: the stock market listing of other parts of the group. As Arndt Ellinghorst, automotive expert at data analytics firm QuantCo puts it:

The Porsche IPO will most likely be a success…investors are lining up. If the Porsche IPO goes well, one could imagine putting other parts [of Volkswagen] like Audi on the stock market.