Ticker Symbol: VOW
In what could be one of the biggest initial public offerings of years, Volkswagen AG announced today that it would list its iconic car maker, Porsche AG. The listing follows the 2015 IPO of sports car behemoth Ferrari by parent company Fiat 2015. The offering is supposed to raise fresh cash for parent company VW, which would allow it to fund its electric vehicle strategic shift that the company’s board and management have outlined. Volkswagen shares surged by 6% after the announcement was made.
Sell-side analysts value Porsche between $60 billion and $85 billion, despite the sharp drawdown in global equity markets this year. Soaring commodity prices, supply shortages, and labor unrest have caused many major economies to slow down. However, Porsche is one of the few historical luxuries and sports car makers in the world, and investors may bid up shares in the company for a rare opportunity to purchase ownership in one of the most valuable brands in the automotive industry.
Volkswagen said it plans to make only 12.5% of Porsche available to individual investors. At the more expensive valuation of $85 billion, that would raise roughly $10.6 billion for the parent company. At the low end, the plan would raise $7.5 billion for VW. Porsche also plans to transition into the electric era, saying in previous communications that it plans 80% of its vehicles to be electric by 2030. The company’s Taycan, its EV offering in the marketplace, has already become the third-most-popular car at the company, replacing the iconic 911 sports car.
In the previous fiscal year, Porsche sold over 300,000 new cars, an increase of 11% from the fiscal year 2021. The division also accounts for roughly 50% of Volkswagen’s profits from the passenger vehicle division of the company, despite making only approximately 10% of the total cars that the parent produces. Chief Executive Officer Oliver Blume, who leads both the parent VW organization as well as Porsche, said in the release that the move was a “historic moment” for the companies.
Porsche generated revenue of €33.1 billion in fiscal 2021 or roughly €110,333 per car produced. The company had a profit margin of 16% in the year as well, significantly higher than the average profit margin of most car manufacturers. The current valuation multiple would represent at an enterprise value of 2-2.5x revenue. Ferrari, on the other hand, trades at a multiple of over 7x revenue. The company has also lined up some large cornerstone investors, with an additional 12.5% of the company being sold to family heirs, the Qatar Investment Authority, and other institutions.
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