IPO: Porsche shares rise for debut in Frankfurt

The stock market has known only one direction for weeks and that is down. In the middle of this week, the German share index (Dax) even slipped below the 12,000 point mark, the lowest it has been since November 2020. The reasons: the war in Ukraine, a deep energy crisis, high inflation, an impending recession – and much more.

So the omens were anything but favorable for an IPO, the largest since 1996, when Deutsche Telekom was privatized. But Volkswagen still managed it with its sports car subsidiary Porsche. This Thursday, the share was listed on the stock exchange for the first time – and initially increased by around five percent to up to 86 euros, and then stabilized at just under 85 euros. The demand for the new value had already been high beforehand, and the share was allocated at the top end of the price range at EUR 82.50.

Demand was already high in advance: Five times as many orders were placed in advance as there were shares to be sold. The stock market abbreviation is “P911”, based on the legendary 911 sports car with its roaring boxer engine, which has so far only been available as a petrol version and not with an electric motor. The telephone number for Porsche’s head office is also 911. The share capital has been divided into a total of 911 million shares.

It’s a miracle called Porsche.

“Today a big dream is coming true for us,” said Oliver Blume on Thursday at the Frankfurt Stock Exchange: “This is a historic moment for Porsche.” Since September, Blume has been managing Porsche and the Volkswagen Group, which previously owned 100 percent of Porsche. VW CFO Arno Antlitz said: “We proved today that Volkswagen can capital market, even in a challenging market environment.”

Porsche now has a value of almost 78 billion euros. This makes the Stuttgart company more valuable on the stock exchange than Mercedes-Benz with 57 billion euros and BMW with 46 billion euros, although the two competitors produce significantly more vehicles. Porsche produces around 300,000 vehicles a year, and the profit margin with the high-priced sports cars is significantly higher than with the competition. Unusual: The parent company Volkswagen itself was only slightly above the value of its own subsidiary Porsche on Thursday with 80 billion euros.

There haven’t been any major IPOs for a very long time

However, it is unlikely that Porsche will become the “icebreaker” for further IPOs, as predicted by CEO Blume. The uncertainties on the markets are too great. IPO candidates have not come out of cover so far either. In any case, there have not been any major IPOs in the past two years, only smaller ones, and almost all of them are in the red.

A total of almost 114 million Porsche preferred shares were placed. That includes around 15 million shares as an additional over-allotment because things were going so well. According to Porsche, the majority of the shares went to large investors. Private investors only received 7.7 percent of the placement volume. Because the offer was oversubscribed, not all private shareholders could have been considered, it said. Four major financiers, including VW’s major shareholder Qatar, had already secured almost 40 percent of the shares in advance. Another 114 million voting shares went to the family holding company Porsche SE, which should not be confused with the sports car manufacturer. This in turn is a major shareholder of VW and paid 88.69 euros per Porsche share. Porsche SE, which now has a blocking minority in the sports car manufacturer, is controlled by the Porsche and Piëch families.

Everyone should benefit from the money: VW, family, employees, shareholders

Overall, VW will receive around 20 billion euros from the IPO. Half of this is to be distributed to VW shareholders, the special dividend still has to be approved by an extraordinary general meeting. The other half of the proceeds are to be invested in the Group’s conversion to e-mobility. In addition, the VW management hopes that the group as a whole will be worth more on the stock market with the new stock exchange subsidiary. The employees should also benefit: The VW employees in the company tariff and in Saxony receive a bonus of 2000 euros. Porsche has not yet officially announced the amount of a possible bonus for employees.

Open detailed view

Investors, VW hopes, can and will now be able to invest money specifically for a few very defined sports car products such as the 911. On the other hand, those who put their money in the Volkswagen Group invest in trucks, buses, large cars, medium and small, from Spain, the Czech Republic, China, Wolfsburg – and also in Porsche.

Investors in particular had the lack corporate governance in the group, at VW and Porsche, criticized, i.e. deficits in good corporate governance. Many participants have self-interests that are not congruent with the company and which are not clearly separated from each other. Blume is CEO of VW and Porsche, but the interests of the two listed companies can differ. Porsche wants more independence, VW insists on synergies between the car manufacturers.

In addition, according to another accusation, there is a lack of external expertise on the supervisory board because the state of Lower Saxony, which has a 20 percent stake in VW, unions and then the two car clans, the Porsches and the Piëchs, fill almost all the seats. There is no room for fresh minds, especially those with contradictory powers. At Porsche, at least two other external people were recently appointed to the control committee: the former Gucci manager and freelance businesswoman Micaela le Divelec Lemmi and Melissa Di Donato Roos, head of the German software company Suse.

With Ferrari as a role model, things went differently

One of the models for the Porsche IPO was Ferrari. Fiat-Chrysler and the ruling Agnelli clan almost completely floated the luxury sports car manufacturer on the stock exchange in two rounds in 2015 and 2016. This is a success story, not only because of the stock exchange abbreviation: “Race” is the name of the share on the New York Stock Exchange. The initial issue price was a good $50, although the war in the Ukraine broke the fairly steady upward trend, but the share is currently still around $190 and the company value is around EUR 40 billion, although Ferrari, with around 10,000 vehicles, is only a fraction of Porsche manufactures. Despite all the world crises, there is apparently almost always money in the world for luxury, both among customers and investors.

However, Porsche will not be as independent as Ferrari in the foreseeable future, although the management at the headquarters in Stuttgart-Zuffenhausen are very hopeful of the new independence. But VW and Porsche SE will continue to control 100 percent of Porsche’s voting rights in the future – and double boss Oliver Blume will also ensure that nothing gets out of hand.