Volkswagen needs the cash and wants to catch up with Ferrari but there may be less to this deal than meets the eye
What gets the pulses of the super-rich racing? Fast cars and stock market floats probably feature high on the list. The initial public offering (IPO) of Porsche is well set to deliver thrills on both counts when shares start trading on Frankfurt’s stock exchange on Thursday.
With a hoped-for valuation of €75bn (£65bn), the spin-out of the German sports carmaker from its owner Volkswagen would count as the fifth-largest float in European history.
But there is no getting around the fact that it is a strange time to be punting a giant IPO. After two years of central bank stimulus to prop up the pandemic economy, inflation driven by the war in Ukraine has brought the prospect of recessions in major markets. Carmakers are still facing tough supply chain challenges.
Dealmaking has slumped. Global IPOs have been worth £97bn so far in 2022, compared with £320bn last year, according to the data company Dealogic. In Europe the difference is even starker, with floats worth a paltry £4.8bn this year, compared with £48bn in 2021.
Volkswagen and Porsche have been intertwined since the very start: Ferdinand Porsche founded a car company in the 1930s, before designing the original “people’s car”. Why would it choose this moment to undo that pairing?
One reason is fairly straightforward: Volkswagen needs the cash. It could receive as much as €19.5bn in the deal (although it will pay out nearly half as a special dividend). The world’s second-largest carmaker by volume has gone all-in on producing electric-only models, stung by the fines and reputational catastrophe of the diesel emissions-cheating scandal. That electrification push means it needs money to retool factories.
Another reason is that other brand with a black prancing horse on its logo: Ferrari. The Agnelli family that runs the Italian carmaker has made a packet by convincing drivers and investors that Ferrari is a maker of luxury goods rather than a glorified metal-basher. Ferrari shares trade at 38 times its earnings per share, against a meagre four times for VW.
Volkswagen hopes an independent Porsche could close some of that gap, delivering a handy windfall. Whether that is possible is another matter. Porsche’s bulky Cayenne SUVs (“more convenient and practical” in the faintly damning words of an investment bank analyst) and even its new Taycan electric cars are increasingly common sights – hardly exclusive luxury items.
Nor will Porsche be throwing off the shackles of an overbearing parent. The Porsche-Piëch family, Volkswagen’s largest shareholder, will receive about a quarter of the voting shares in Porsche, a decade after they ceded control to VW. Oliver Blume was elevated to lead Volkswagen when Herbert Diess was given the boot in July, but stayed on top of Porsche as well. He will keep both jobs after the float. Retaining close links to the Volkswagen behemoth might be handy as Porsche pushes to make 80% of its cars all-electric by 2030, but this is hardly a clean break with the past.
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Still, this is not a frothy float of a startup that has never made a profit. Porsche had revenues of €33bn and profits of €4bn in 2021, and it sells genuine household-name models such as the 911, referred to in the float’s planned P911 ticker. Advance requests for the shares have far exceeded supply, and a series of state-backed investors have promised support. But even if shares pop and investors and bankers enjoy a juicy gain, it would be unwise to take this shuffling of dynastic fortunes as a bellwether for a broader market in good health.