Daily Management Review

Investors Are Split As Porsche Seeks Up To $75 Billion In Funding


Investors Are Split As Porsche Seeks Up To $75 Billion In Funding
In line with investors' mixed reactions to the automaker's plans to list sports car maker Porsche AG in what could be Europe's third largest initial public offering, Volkswagen shares traded at or near breakeven on Monday.
Volkswagen stated on Sunday that it aimed to value Porsche AG at 70-75 billion euros, which is significantly higher than the 49-billion-euro price tag for rival BMW and Mercedes-Benz and slightly below some estimates of up to 85 billion euros.
Despite the fact that shares of other luxury automakers like Ferrari and Aston Martin have fallen this year due to the turmoil on European stock markets, Porsche AG hopes to attract investors with its track record of success and high margins.
However, some fund managers have criticized the listing's structure, in which Porsche SE, Volkswagen's largest shareholder, will receive a blocking minority of 25 per cent plus one of the voting ordinary shares. View More
With only 12.5 per cent of Porsche AG's capital being held by stock market investors and no voting rights, 25 per cent of preferred shares will be listed in the IPO.
Porsche SE, the holding company of the Porsche and Piech families of Germany, will pay a premium of 7.5 per cent for the shares it acquires in the listing. However, the prospectus for the IPO, which was made public on Monday, states that it will be treated as though it already owns the stake before that premium is transferred.
Risks to the sports car brand were listed in the prospectus, including unstable energy supply, supply chain shortages, challenges in managing the partnership with Volkswagen, and Oliver Blume's dual role as CEO of both businesses.
Despite this, the listing has drawn key investors, including Qatar Investment Authority, which is purchasing 4.99 per cent of the offering, Abu Dhabi's ADQ, which is investing 350 million euros, T. Rowe Price, and Norway's sovereign wealth fund, each of which is investing 750 million euros.
"Our starting point is that we always want to be able to vote," said Carine Smith Ihenacho, chief governance and compliance officer at the Norwegian fund.
"We do, however, own shares in a number of companies where shareholder rights are weaker than we would like... voting rights are not the only way to exert influence though," Smith Ihenacho added in a statement to Reuters.
Shares of Volkswagen, whose listing of Porsche AG has been suggested by some analysts as a way to increase value for its own stock, were little changed at 1556 GMT after rising 3 per cent in premarket trade.
According to Ingo Speich, head of sustainability and corporate governance at top-20 Volkswagen investor Deka Investment, questions about the two companies' governance may be to blame for the markets' lack of enthusiasm.
"If the splitting off of two companies improves the management quality and strategic direction of a business, that will be reflected in the valuation," Speich said. "It is fundamentally right that Porsche AG becomes more independent - but this is not an independent set-up."
According to the prospectus, Oliver Blume will split his working time equally between the two businesses.
He will receive all of his compensation from Volkswagen up until the end of the year, then receive about 60 per cent of it from the group and the remaining 40 per cent from Porsche AG, reflecting the disparity in pay between the two companies.

Porsche AG stock has been compared by analysts to Ferrari, which has a market cap of 38 billion euros but a higher operating margin than Porsche (17–18 per cent). The German automaker is far ahead in electric vehicles and aims for a 20 per cent margin.
The prospectus stated that Porsche AG will pay a first dividend of 911 million euros along with an additional dividend of 0.01 euros per preferred share in 2022 as another homage to its renowned 911 model. For the listing, the capital of Porsche AG is divided into 911 million shares.
"Investors are queuing up. If the Porsche IPO goes well, one could imagine placing other parts [of Volkswagen] such as Audi on the stock exchange," auto expert Arndt Ellinghorst of data analytics firm QuantCo said.
Shares will be made available to private investors in Germany, Austria, Switzerland, France, Italy, and Spain from September 20 to September 28 during the subscription period for both individual and institutional investors.
Volkswagen could use the 18.1–19.5 billion euros in total proceeds from the sale to help finance its electrification initiative.