Bloomberg: Porsche is pitching its initial public offering as a chance to invest in a company that combines the best of carmaking rivals like Ferrari NV and luxury brands such as Louis Vuitton. The problem is, not all investors are buying it.
In early meetings with portfolio managers, the Volkswagen AG unit compared itself to the French handbag maker and Cartier owner Richemont as businesses that generate healthy profits and significant sales volumes, according to people familiar with the matter. It also cited Ferrari, which boasts industry-leading margins but ships only a fraction of the more than 300,000 cars Porsche makes every year.
Among concerns flagged by investors is a listing structure that fails to make Porsche more independent from its parent, said the people, who asked not to be identified discussing confidential information. They’re also citing headwinds in the IPO market, which has slowed dramatically due to jitters over runaway inflation, rising interest rates and the war in Ukraine that’s sparked Europe’s worst energy crunch in decades.
“Porsche isn’t a safe bet in a recession because it’s not as exclusive as Ferrari,” said Daniel Roeska, an auto analyst at Bernstein. “And if you don’t change the governance and allow Porsche to decide what’s best for itself rather than making decisions at the group level, then you’re not maximizing shareholder value.”
The offering, which may launch as soon as September, is poised to be one of Europe’s biggest ever. VW has hired more than a dozen banks to push the IPO, which could value Porsche at as much as 80 billion euros ($80.5 billion) to 90 billion euros, according to people familiar with the matter. If achieved, that could even exceed the parent company’s current market value. It comes at a time when automakers are battling supply-chain snarls and have embarked on a costly transition to electric vehicles.
Still, an IPO of that size is so rare in Europe that it can defy the broader market slump, with portfolio managers forced to take a hard look at the candidate because it will automatically enter the region’s main equity benchmarks, the people said.
While VW didn’t provide specific numbers or a valuation target in the meetings in Europe and the US, fund managers who attended were left with a positive impression about the brand’s potential to lift margins in the medium term, the people said. Porsche is holding a capital markets day where it could map out a renewed profit push.
But several fund managers remain concerned about Porsche’s small free float of 12.5%, and a dual-class share structure that leaves little room for greater managerial independence.
VW plans to sell a stake of as much as 25% of preferred shares that don’t carry voting rights. The powerful billionaire Porsche and Piech clan, which controls VW through voting stock, would receive a special dividend to fund buying a blocking minority stake in Porsche.