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Porsche defies markets with blockbuster IPO, but biggest test awaits
Tipped to be one of the largest initial public offerings (IPOs) of the year, German sports auto-maker Porsche has fulfilled expectations, becoming the biggest listing in Germany since 1996 and the second biggest ever for the European nation.
Expectations for a heavily oversubscribed offer, with valuations from Deutsche Bank and Morgan Stanley pushing past the US$100 billion mark, rang true, with shares peaking at €86.76. After closing at €82.5, Porsche AG is now worth €75.43 billion, only slightly less than former parent Volkswagon at €80.1 billion.
A quarter of Porsche ownership rests with the Porsche and Piech families, with 40 per cent spread across the Norwegian and Abu Dhabi sovereign wealth funds, plus T. Rowe Price and the Qatar Investment Authority.
Global market analyst Ben Laidler from online trading platform eToro was confident the Porsche IPO would be priced at the top end of its guidance, which valued the company between €70billion to €75billion.
“Luxury car maker Porsche is set to defy the global drought in stock market listings this year with a bang,” Laidler said before the launch.
“Its spin-off from Volkswagen seems set to price at the top of its price range according to press reports, giving it a market capitalization of around USD$75 billion and making it one of Europe’s largest ever IPOs.”
According to Laidler, Porsche AG is one of Volkswagen’s most valuable and recognizable brands with an enviable record of generating consistent profit. Volkswagen’s portfolio is better suited with the VW and Porsche operating as individual entities, he argued.
“This would rank Porsche as the fifth largest listed global carmaker, just behind parent Volkswagen and well ahead of General Motors,” Laidler explained. “This is an even bigger achievement in a year when global IPO activity has fallen over 60 per cent and the weak equity markets tested new bear market lows for the year.”
Porsche’s long-term strategy to move towards electric vehicles and even autonomous driving is being well-received, Laidler said. Volkswagen also needs the cash to help transition to electric-only models. That electrification push means it needs money to retool factories.
“A successful IPO will be welcomed by parent Volkswagen which needs billions to help fund its electric vehicle transition, and by its shareholders, set to receive a large dividend of Porsche proceeds,” he said.
Despite being a lackluster year for IPOs, the Porsche listing was always going to be an exception according to Laidler.
“We think Porsche is the global IPO exception rather than the start of a new listing recovery. It is a unique combination of strong name recognition, premium brand, big parent backing, and a prior stock market listing history.
“Arguably the biggest test is still to come with Porsche needing to deliver on its plan to successfully grow volumes and profit margins in the slowing global economy. This would help it avoid the 45 per cent price decline seen this year by the Renaissance International IPO index of recently listed stocks.”
Commenting on the IPO, Porsche chairman Oliver Blume said the move marked a “new chapter in the history of our company”.
“Today, a big dream comes true for Porsche,” Blume added. “Our increased degree of autonomy puts us in a very good position to implement our ambitious goals in the coming years.”
