Porsche rises in landmark IPO weathering tough markets

Porsche gained during its trading debut after parent Volkswagen set the final listing price for the sports-car maker at the upper limit in a bid to defy deep market upheaval.

The manufacturer of the 911 sports car rose as much 2.9 per cent to €84.90 in Frankfurt — against a decline of as much as 2 per cent in Germany’s leading DAX index — after slipping to its offer price of €82.50 apiece, the top end of VW’s initial range for the shares that valued the company at €75 billion.

The listing, reaping €9.4 billion in proceeds for VW, is Europe’s largest initial public offering (IPO) in a decade and contends with some of the most challenging market conditions in years.

“Today is a historic day for Porsche, Volkswagen and Porsche chief executive Oliver Blume said. “The first reaction of the market is very positive and that shows the potential of our company.”

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The listing of the carmaker is a bold move into public markets, which have been largely shut to IPOs for most of the year, with companies shying away from seeking new listings because of the European energy crisis, rising interest rates and record inflation. The sale will help Volkswagen raise funds to plough into its electrification push, while investors get a slice of an emotional brand akin to Ferrari, which also managed a successful separation from parent Fiat in 2015.

“I was expecting the shares to trade in the high €80s or low €90s given the oversubscription and the interest from retail,” said James Congdon, who runs Canaccord Genuity’s Quest research unit. Worsening economic indicators over the last few days and profit warnings may be changing investors’ appraisal of Porsche and its ability to hit its growth targets over the medium term, he said.

Following the trading start, the preferred shares of VW declined as much as 6.2 per cent, while the investment company of the Porsche-Piech family slumped as much as 9.2 per cent.

Companies raised less than $10 billion in IPOs this year through August, an 83 per cent drop in proceeds from the same time last year. Porsche’s listing is set to be the largest in Europe since miner Glencore raised almost $10 billion in a London IPO in 2011.

“If you can pull off an IPO in such a difficult market, it shows the attractiveness of the business, Jefferies analyst Philippe Houchois said.

The share price puts Porsche at a valuation that’s not far from VW’s total market capitalisation. Yet for all its aggressive marketing, the listing has also garnered negative attention for its complex structure.

Volkswagen divided Porsche’s share capital into equal parts voting and non-voting shares, with the German carmaker retaining 75 per cent ownership. Some 12.5 per cent of total share capital — only non-voting shares — is being publicly listed, with a large portion going to four cornerstone investors. Qatar Investment Authority, Norway’s sovereign wealth fund, T Rowe Price and ADQ have together committed to take up as much as €3.7 billion of the IPO.

The other 12.5 per cent of total shares up for grabs is going directly to VW’s largest shareholders — the billionaire Porsche and Piech family. The family already owns a 53 per cent majority of VW’s voting shares, and under the IPO terms, they will also get 25 per cent plus one share of Porsche’s voting stock, paying a small premium to preferred shares for a total of €10.1 billion.

Until 2009, the family owned half of Porsche and all voting rights, but they were forced to sell the sports-car business to VW after their attempt to take over German carmaker went awry. The IPO restores family control over an asset that has been long out of reach.

Porsche is targeting revenue of as much as €39 billion this year and return on sales of as much as 18 per cent, up two percentage points from last year, the company said in July.

Besides the Byzantine ownership structure, governance is another issue for some investors. Porsche chief executive Blume was recently elevated to chief executive of Volkswagen, while retaining his post at the unit. — Bloomberg