Volkswagen is preparing an initial public offering of Porsche, seeking a listing of its most profitable asset to help boost the parent’s valuation and fund the push into electric vehicles.
VW’s preferred shares surged as much as 10 per cent after the announcement on Tuesday on a possible IPO outline between the car maker and Porsche Automobil Holding, a company controlled by the billionaire Porsche and Piech family.
The tentative listing, estimated to value the sports car brand at as much as €85 billion ($96bn) by Bloomberg Intelligence, would partly reverse a tumultuous takeover of Porsche more than a decade ago and signals the extent of the upheaval sweeping the industry.
RBC analyst
Europe’s biggest car maker has been pushing for years to adopt a less centralised corporate structure to become more nimble and step up its challenge to Tesla. Success has been modest. The IPO of Traton, VW’s truck-making unit, fizzled amid internal ructions and a limited free float, while a plan to separate the Lamborghini supercar and Ducati motorcycle brands didn’t progress.
Volkswagen’s management and supervisory boards still have to sign off on the framework agreement with Porsche and a final decision hasn’t yet been made, the car maker said.
“Volkswagen has confirmed what we suspected for some time, that it’s in advanced talks for an IPO of its Porsche brand, which we value at €60-85bn,” Bloomberg Intelligence said.
“Porsche benefits from both its luxury appeal and an electrification edge, with an anticipated 40 per cent-plus battery-electric-sales mix by 2025.”
While VW chief executive Herbert Diess appeared to pour cold water on a Porsche listing about a year ago, he’s under pressure to start catching up to Tesla.
After a well-received presentation of VW’s accelerated EV plans last March and successful models like the Porsche Taycan, efforts have sputtered and its market valuation remains dwarfed by the US EV leader.
Support for the push will be hard won even as industry momentum for bold moves is building. VW’s 20-member supervisory board is prone to convoluted decision-making.
Worker representatives, who account for half the seats, are often aligned with the two officials from the German state of Lower Saxony to protect jobs. The sprawling Porsche-Piech clan, the biggest backer of Mr Diess, also needs to coalesce to approve major strategic overhauls.
Mr Diess’s consideration of deep job cuts sparked backlash from unions late last year, putting him on the defensive. In the end, VW agreed to a compromise that included a plan for an €800 million tech campus and pledge to build a new EV factory near its Wolfsburg headquarters.
“We think a Porsche IPO, which has been a hot topic of discussion for years, is now more of a possibility of actually happening than ever before,” RBC analyst Tom Narayan said in a note.
“What is different now, however, is that the Porsche family is firmly behind it as we expect Porsche to be a buyer of a Porsche brand IPO.”
A plan to list Porsche chimes with deep restructurings among traditional car makers and suppliers. In the latest example, Ford Motor is looking at ways to separate its EV operation from its century-old legacy business to unlock value.
Going ahead with the listing would boost Europe’s flagging IPO market. Share sales have slowed dramatically this year after a record-setting 2021.
Separating Porsche could offer a new funding option for the group. VW largely relies on generating enough cash on its own or issue bonds. Its convoluted shareholder structure limits options to raise fresh equity capital like Tesla has done, without diluting shareholdings of key stakeholders that control about 90 per cent of VW’s voting stock.
Porsche is the most recognisable brand in VW’s stable and highly profitable line, among other nameplates such as Audi, Skoda and Bentley.
Creating the multi-brand structure was the brainchild of Ferdinand Piech, the chief executive and chairman of VW, who engineered the Porsche takeover despite opposition from his cousin, Wolfgang Porsche. Piech passed away in 2019, aged 82.
Porsche chief financial officer Lutz Meschke first raised the benefits of a potential IPO in 2018, saying such a move could unlock value and replicate Ferrari's successful share sale years earlier. The deliberations didn’t gain support from VW at the time.
But the prospect has remained part of conversations around Porsche and officials have openly played around with the idea that would give one of the world’s most coveted car brands more independence.
“I think Porsche could be an interesting part for thinking about an IPO,” Porsche chief executive Oliver Blume said during a briefing with US reporters last year, cautioning that a final decision won’t be his to make.
“We have to hand it to Volkswagen and they have nothing decided.”
