Porsche races higher after landmark US$72b listing

Thursday, 29 Sep 2022 11:50 PM MYT

FRANKFURT, Sept 29 — Porsche AG shares made a strong start today after Volkswagen defied volatile markets to list the sports car brand at a valuation of €75 billion (RM334 billion) in Germany’s second-biggest market debut.

Volkswagen priced Porsche AG shares at the top end of the indicated range and raised €19.5 billion via the listing to fund the group’s electrification drive.

The shares traded at €82.90 (US$80.66) at 1347 GMT today, close to the issue price of €82.50, after peaking earlier at €86.54.

That put Porsche AG’s valuation at about €75.43 billion, only slightly below former parent Volkswagen, which is worth around €80.1 billion, and ahead of rivals such as Ferrari. It is Germany’s biggest listing since Deutsche Telekom in 1996.

Shares in Porsche SE, Volkswagen’s largest shareholder, which now also owns a blocking minority in the sportscar brand, were down by 10 per cent as investors switched across. Volkswagen’s shares were down 6.9 per cent from today’s open to €129.1 at 1343 GMT.

Traders said some investors who bought Volkswagen and Porsche SE as an IPO play could be unwinding their positions and switching into Porsche AG, undermining Volkswagen’s aim of bumping up its capitalisation by showcasing the value of just one of its brands.

“Porsche was and is the pearl in the Volkswagen Group,” said Chris-Oliver Schickentanz, chief investment officer at fund manager Capitell. “The IPO has now made it very, very transparent what value the market brings to Porsche.”

Volkswagen CEO Arno Antlitz told Reuters the listing had done its part in helping to fund the carmaker’s electrification drive.

Of the €19.5 billion raised from the IPO, around €9.6 billion will go to Volkswagen — just under a fifth of the €52-billion budget needed for electrification plans — with the rest distributed among shareholders as a special dividend.

“We are well set-up financially have strong cash flows to fund our electromobility strategy ourselves,” the chief financial officer said.

‘Not a dream environment’

Volkswagen priced Porsche AG shares at the top of the range despite broadly weaker stock markets after red-hot German inflation data and general market turmoil amid soaring inflation and rising interest rates.

“This is not exactly a dream environment for an IPO today,” said QC Partners wealth manager Thomas Altmann.

Volkswagen has said the market’s volatility was precisely why fund managers were sorely in need of a stable and profitable business like Porsche AG in which to invest.

A banker involved in the transaction described the Porsche listing as a one-off, predicting the market would freeze over again very soon.

The listing broke records, reaping the highest amount since Deutsche Telekom in 1996.

But Porsche is trading at a multiple of around 7.2 times its earnings — far below Ferrari’s multiple of 40.

Companies in the region have raised US$44 billion (RM204 billion) from equity capital markets deals up to September 27, Refinitiv data shows, with only US$4.5 billion from initial public offerings.

“There’s a lot to like about the company, with its aggressive electrification plans, expected strong cashflow generation and premium brand positioning in the market,” Chi Chan, Portfolio Manager European Equities at Federated Hermes Limited, told Reuters.

“However, it is coming to market at a time of unprecedented turmoil and consumer confidence is falling.”

Porsche AG Chief Executive Blume, whose dual role as the new head of Volkswagen has drawn criticism from some investors, hailed the listing as an “historic moment” and dismissed the idea that he would at some point give up one of the two positions.

Up to 113,875,000 Porsche AG preferred shares, carrying no voting rights, were sold in the initial public offering.

Bank of America, Citigroup, Goldman Sachs and JPMorgan worked as joint global coordinators and joint bookrunners on the deal, while Mediobanca acted as financial adviser to Porsche. — Reuters