VW in advanced talks on potential Porsche IPO

By BLOOMBERG | 22 February 2022

FRANKFURT: Volkswagen AG is preparing an initial public offering of Porsche, seeking a listing of its most profitable asset to help boost the parent’s valuation and fund the push into electric vehicles.

VW and family holding company Porsche Automobil Holding SE have negotiated a framework agreement to form the basis for preparing a potential IPO, the company said today in a statement.

VW’s preferred shares surged as much as 10% in Frankfurt trading.

Europe’s biggest carmaker has been pushing for years to adopt a less centralised corporate structure to become more nimble and step up its challenge of Tesla Inc.

It’s rolling out the industry’s broadest lineup of electric cars including the ID.4 and the Porsche Taycan, but its market valuation is still dwarfed by the US EV leader.

Volkswagen’s management and supervisory boards still have to sign off on the framework agreement and a final decision hasn’t yet been made, the carmaker said.

Bloomberg Intelligence estimates Porsche could be valued at between 60 billion and 85 billion euros (RM401bil).

That compares with a current market value of around 112 billion euros (RM532bil) for the entire group. Apart from the main VW car brand and Porsche, the German manufacturer also owns nameplates like Audi, Lamborghini and Bentley.

Funding options

A separate Porsche listing could offer a new funding option for the group. VW largely relies on generating enough cash on its own or issue bonds, because its convoluted shareholder structure limits options to raise fresh equity capital like Tesla has done, without diluting shareholdings of key stakeholders that control about 90% of VW’s voting stock.

VW chief executive officer Herbert Diess appeared to pour cold water on a Porsche listing about a year ago after Bloomberg News and German media reported deliberations about an IPO.

But Porsche officials have openly flirted with the idea that would give one of the world’s most coveted car brands more independence.

"I think Porsche could be an interesting part for thinking about an IPO,” Porsche CEO Oliver Blume said during a briefing with US reporters last year, cautioning that a final decision won’t be his to make.

"We have to hand it to Volkswagen and they have nothing decided.”

Porsche chief financial officer Lutz Meschke first raised the benefits of a potential IPO in 2018, saying such a move could unlock value and replicate Ferrari NV’s successful share sale years earlier. The deliberations didn’t gain support from VW at the time.

The listed Porsche Automobil Holding SE is separate from the sportscar business.

It was created more than a decade ago when Porsche tried to take over control a much-larger VW.

The ill-fated attempt imploded when funding dried up during the financial crisis and the sportscar business was folded into VW group and Porsche SE remained a separate legal entity.