Porsche IPO: Everything you need to know about the Porsche IPO

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Josh Warner
By : ,  Market Analyst

When is the Porsche IPO?

The initial public offering (IPO) of Porsche AG could happen as early as the fourth quarter of 2022, although the timing will depend on market conditions and reports have already suggested the IPO could be scrapped or delayed.

The Financial Times reported in February that Volkswagen, the current owner of Porsche AG, was forced to rush out a statement about the IPO plans in order to satisfy market disclosure rules, following a drip-feed of rumours from the German carmaker’s array of stockholders. That implies that Volkswagen revealed its IPO plans earlier than it wanted to.

 

Who owns Porsche AG?

Porsche AG is owned by Volkswagen Group. The two companies have worked together since the 1960s and Volkswagen acquired a 49.9% stake in Porsche AG in 2009 before buying the rest of the business a few years later.

However, it is important to understand the shareholder structure of Volkswagen Group itself. Volkswagen is controlled by an entity named Porsche Automobil Holding SE (Porsche SE), which owns over a 31% stake in the business but over half of all the voting rights. Porsche SE is also a listed entity. Below is a breakdown of the ownership stake and voting rights held in Volkswagen:

Volkswagen Shareholder

Stake

Volkswagen Shareholder

Voting Rights

Porsche SE

31.4%

Porsche SE

53.3%

Foreign Institutional Investors

27.0%

State of Lower Saxony

20.0%

Qatar Holding

10.5%

Qatar Holding

17.0%

State of Lower Saxony

11.8%

Free Float

9.7%

Private Investors/Other

16.0%

German Institutional Investors

3.3%

(Source Volkswagen AG)

In turn, all of Porsche SE’s ordinary shares are in the hands of members of the Porsche and Piëch families, although it does have preference shares that are roughly split 50/50 between foreign institutional investors and German-based private investors. The Porsche and Piëch families are descendants of Ferdinand Porsche, who founded Porsche back in April 1931 but only released his first branded automobile, the Type 365, much later in 1948.

This ultimately means that Porsche family controls Volkswagen, which in turn currently owns the Porsche brand.

 

What do we know about the Porsche IPO?

Volkswagen has said it plans to divide the stock of Porsche AG – half into ordinary shares and the other half in preference shares.

Up to 25% of the preference shares will be listed as part of the IPO, which would mean just 12.5% of its total shares will be floated. While the ordinary shares will have voting rights, the preference shares will not – meaning those that invest post-IPO will own a stake in Porsche AG but have no say over how it is run.

The ordinary shares will not be listed and will remain in the hands of Volkswagen, meaning it will remain the controlling shareholder after Porsche AG is listed and continue to be consolidated into its own financial statements. However, Porsche SE – controlled by the Porsche and Piëch families – will buy just over 25% of the ordinary shares in Porsche AG at a 7.5% premium to the eventual IPO price.

This is important as any interested investors must understand that Porsche AG will remain firmly under the control of both Volkswagen and Porsche SE and that its free float will only include a fraction of its overall shares and offer no voting rights. This will make it difficult for any investor to build a significant stake in the business or push for change.

 

How much is Porsche worth?

Media reports suggest Porsche AG could target a valuation of up to EUR90 billion, or $100 billion, which would make it one of Germany’s largest-ever listings. However, the final valuation is yet to be determined and will be made closer to the IPO.

Based on the EUR90 billion valuation and 12.5% of its overall shares being floated, the IPO would raise somewhere in the region of EUR11 billion. Volkswagen has said it plans to pay out 49% of total gross proceeds from the listing to shareholders via a special dividend, with the rest being used to invest in the business and drive its new strategy.

 

Why is Volkswagen considering the Porsche IPO?

Volkswagen said it was exploring the potential of spinning-off Porsche through its own IPO in February 2022, stating a listing would ‘would provide more entrepreneurial freedom to Porsche AG, while crystalizing the company’s value for Volkswagen shareholders’.

The carmaker believes listing Porsche would ‘mark [the] next step in Volkswagen’s transformation from brand manufacturer to a vertically integrated mobility group, providing additional flexibility to accelerate group’s NEW AUTO strategy’ that will see it invest heavily in areas like software for autonomous driving, battery technology and recycling, and charging infrastructure.

Although Volkswagen is a world-renowned brand, the company is made up of an array of brands spanning everyday names like Skoda to premium brands like Lamborghini, Ducati, Audi and Bentley. Within this mix of brands, Porsche AG has been one of the most successful by focusing on quality and serving the top-end of the market. While Porsche accounted for just 3.5% of all the deliveries made by Volkswagen in 2021, the brand generated 12% of the company’s overall revenue and 26% of its operating profit.

With this in mind, Volkswagen is hoping a spin-off can not only raise some cash needed for its ambitious investment plans but also allow Porsche to realise its full value. Volkswagen itself is only currently valued at EUR100 billion, just above the anticipated valuation that Porsche AG will achieve on its own. Volkswagen shares have lost over a third in value over the past year and have significantly underperformed the wider market.

 

What does Porsche do?

Porsche AG is a known around the world as a top automotive brand. Porsche AG currently has six core models available, many of which have variants. These are the 718 and 911 sports cars, the electric sports car Taycan, the luxury Panamera, and its Macan and Cayenne sports utility vehicles (SUVs).

Porsche produced over 300,000 vehicles in 2021, marking a new all-time record for the company, after a steady ramp-up in output in recent years. Below is an outline of deliveries by model over the last three years:

Deliveries by Model

2019

2020

2021

911

34,800

34,328

38,464

718 Boxster/Cayman

20,467

21,784

20,502

Macan

99,944

78,124

88,362

Cayenne

92,055

92,860

83,071

Panamera

32,721

25,051

30,220

Taycan

813

20,015

41,296

Total

280,800

272,162

301,915

(Source: Porsche AG)

Porsche cars are popular worldwide. Around 28% of all deliveries made in 2021 went to the Americas, with a slightly larger proportion being sold on its home turf in Europe. However, it is Asia Pacific, the Middle East and Africa that boasts the largest demand and took 43% of all deliveries last year, with the bulk of those sales being made in its largest individual market in China.

The heart of the business is in Zuffenhausen, Germany, where the company first started. All of its engines and sports cars are built here and Porsche says the fact it also produces its standard-production vehicles on the same lines makes it ‘unique in the entire automotive industry’. Its second core site was set up in 2022, when it opened a new factory in Saschen which today is responsible for producing the Panamera and Macan models.

Elsewhere, it has a central spare parts warehouse serving dealers around the world based in Sachsenheim, its R&D centre in Weissach and other after-sales and financing operations.

The company employs almost 37,000 people worldwide.

 

Is Porsche profitable?

Porsche AG is profitable. The company has grown sales and profits for at least three consecutive years and generated over EUR33 billion in sales and EUR4 billion in pretax profit in 2021. Below is an outline of its financial performance over the past three years:

Porsche AG (EUR, millions)

2019

2020

2021

Revenue

28,518

28,695

33,138

Operating Profit

3,862

4,177

5,314

Pretax Profit

4,054

4,397

5,729

(Source: Porsche AG)

 

What is Porsche’s business model and strategy?

Porsche AG, like the wider automotive industry, is currently battling against rampant inflation, supply chain bottlenecks and production disruption. This is significant as it highlights that now is not necessarily a great time for a car company to go public, although Porsche AG has demonstrated its ability to keep growing despite the major headwinds considering the record delivery numbers seen in 2021. Still, Volkswagen will be hoping that conditions will improve by the time the IPO happens. There is always the risk that the IPO could be delayed or even pulled altogether if the current environment fails to improve or gets worse.

‘Demand remains high and our order books are looking very robust, so we start 2022 full of momentum and confidence in all regions of the world,’ Porsche AG said earlier this year.

Looking longer-term, the company is currently pursuing its ‘Porsche Strategy 2030’ that aims to ensure the company addresses the significant change happening within the automotive industry, whether it be the move to electric cars or the steady move toward autonomous driving.

Porsche AG is aiming to hold its appeal as one of the most desirable car brands in the world but has committed to addressing the great change happening within the industry while preserving its high level of profitability, which sits much higher than the majority of its peers. It has said it plans to maintain a return on sales of over 15% and a return on investment of over 21%.

Notably, around 25% of all the cars it sold in 2021 were electric, with the sales proportion in Europe and China coming in noticeably higher. Although Porsche AG has made its entry into the world of electric vehicles, management have previously said that Porsche will always offer combustion engines going forward. The way it plans to counter this is by making its balance sheet ‘CO2 neutral’ and by investing in plants to create new eFuels to make petrol cleaner.

 

Who are Porsche’s competitors?

Although Porsche is positioned in the upper end of the market in terms of pricing, its array of vehicles ranging from sports cars to SUVs means it competes with a wide range of other carmakers across the world. For example, its SUVs compete with other German rivals like BMW and Mercedes in Europe and an even bigger pool of competitors in the US. Meanwhile, its sports cars come up against other luxury names such as Ferrari, McLaren and Lamborghini, while other outfits like Lotus and Tesla are also competing against some of its models.

 

How to trade the Porsche IPO

You will be able to trade Porsche AG shares once they go public, but in the meantime you can trade shares in Volkswagen and Porsche SE with City Index in just four easy steps:

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