CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 87.41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Scan to Download iOS&Android APP

Porsche IPO: Could the German sportscar maker close the gap on Ferrari?

By Jenny McCall

10:42, 28 September 2022

Share this article
In this article:
RACEm
Ferrari - EUR
212.69 USD
3.59 +1.720%
VOW3
Volkswagen
140.40 USD
2.25 +1.640%
AML
Aston Martin
1.3121 USD
0.0568 +4.580%
Tags

Subscribe to Weekly Highlights

The major market events for the week ahead right in your inbox. Subscribe
A image of a Porsche car racing
Not all luxury car makers have done well on the stock market - Photo: Getty Images.

Less than 24 hours stand between Volkswagen (VOW3) and its spins-off its luxury car division, Porsche, which was valued at €75bn ($75.2bn) when it first listed on the Frankfurt stock exchange on 29 September, making it one of Europe’s largest stock market floats on record, according to data from Refinitiv.

“Sporting an EBITDA margin of 24.5%, this is high for the industry but still trailing its Italian rival Ferrari (RACEm) and here also lies the potential for future shareholders of Porsche, namely closing the valuation and operational gap to Ferrari,” Saxo Bank’s Head of Equity Strategy, Peter Garnry wrote in a note.

Porsche is a strong car company with revenue up 8% in the first half of 2022, so could it out race Ferrari (RACEm)? 

Volkswagen (VOW3) share price chart

To really answer this question, it’s good to understand the ownership structure of Porsche, as well as the fundamentals of both Ferrari (RACEm) and Porsche and the risks. 

What is your sentiment on VOW3?

140.40
Bullish
or
Bearish
Vote to see Traders sentiment!

Maze-like structure

Not all luxury car makers have done well on the stock market. Aston Martin (AML) is facing bankruptcy, but Ferrari (RACEm) has had great success.

Garnry points out that what makes the Porsche IPO an interesting one is its maze-like ownership structure with VW (VOW3) owning the Porsche brand and car manufacturing but itself being owned by the Austrian Porsche-Piech family.

“The story of why we have ended up in this weird ownership structure started with the privatization of Volkswagen (VOW3) in 1960 in which laws were enacted that stated that any shareholder with more than 20% ownership would have veto over any resolution,” Garnry said.

“The German government kept 20.1% and thus control over Volkswagen (VOW3). In 2005, Porsche SE (the holding company of the Porsche family) began accumulating a stake in Volkswagen (VOW3) and by 2006 it controlled 25.1%. In October 2008, Porsche SE announced that it had acquired 42.6% with options for another 31.5% as it wanted to go to 75% in order to consolidate Volkswagen’s cash position on its balance sheet.”

According to Garnry, with the government still owning 20.1% short sellers scrambled to cover their shorts and Volkswagen’s stock price briefly went above €1,000 making it the most valuable company in the world.

“In the end Porsche SE ended up controlling 53.3% as of the latest shareholder figures. In 2011, Porsche and Volkswagen (VOW3) merged, and Porsche AG was designated as a subsidiary of Volkswagen AG.” Garnry added.

 

The fundamentals

Garnry stresses that Porsche is a well-run organisation that has generated over €33.1bn in revenue in 2011 and an operating profit of €5.3bn and EBITDA of €7.4bn.

AAPL

147.04 Price
+3.660% 1D Chg, %
Long position overnight fee -0.0064%
Short position overnight fee -0.0059%
Overnight fee time 22:00 (UTC)
Spread 0.05

AMZN

95.60 Price
+2.970% 1D Chg, %
Long position overnight fee -0.0064%
Short position overnight fee -0.0059%
Overnight fee time 22:00 (UTC)
Spread 0.13

NVDA

166.46 Price
+5.740% 1D Chg, %
Long position overnight fee -0.0064%
Short position overnight fee -0.0059%
Overnight fee time 22:00 (UTC)
Spread 0.09

UN01

4.52 Price
-9.400% 1D Chg, %
Long position overnight fee -0.0242%
Short position overnight fee -0.0203%
Overnight fee time 22:00 (UTC)
Spread 0.110

“This is good but not on par with Ferrari’s 35.7% in 2021. It should be said that Ferrari (RACEm) is a company that can extract even more in profits per car manufactured due to its higher brand status,” Garnry said.

“With an estimated market value of €75bn and the EBITDA of €7.4bn in 2021 it translates into a multiple of 10.1x which is significantly lower than Ferrari’s multiple of 22.2 times market value to EBITDA.”

Volkswagen (VOW3 and the Porsche family want a successful IPO and are aware of the current market volatility.

Garnry highlights that Porsche’s revenue grew 8% in the first half of 2022 with strong cash flow generation of €3.9bn which is a strong result given the general weakness in the car industry, but still lower than Ferrari (RACEm) which has seen its revenue growing 17.3% year-on-year and 24.9% year-on-year in Q1 and Q2 respectively.

EV focus

Analysts believe the main question from potential shareholders of Porsche, will focus on whether the company can transition easily to become a fully Electric Vehicle (EV) organisation.

“It is clear when you compare Porsche to Ferrari (RACEmthat there is room for improvement and a potential upside if Porsche can improve its operations and expand on its already strong brand,” Garnry said.

“Volkswagen has promised that synergies will continue to exist between the Volkswagen group and Porsche, but for the future success of Porsche we believe the key is more autonomy.”

Ferrari (RACEm) share price chart

Risks are high

But the risks to the Porsche IPO are still very real and its race to beat Ferrari (RACEmwill not come without a few bumps in the road.

The cost-of-living crisis has hit the pockets of millions, with people – even the more affluent, having to tighten their purse strings, the sector is at risk from lower demand.

“Because Porsche buyers are wealthy individuals it is not unreasonable to speculate that falling equity and bond markets could severely impact sentiment among the 1% richest of the world,” Garnry said.

“Another risk for Porsche is if the EUR stages a strong comeback as it would affect the value of international sales and reduce its competitiveness abroad,” Garnry concluded.

Related reading

Rate this article

Share this article

Capital Com is an execution-only service provider. The material provided on this website is for information purposes only and should not be understood as an investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. If you rely on the information on this page then you do so entirely on your own risk.

Latest Stocks news

Still looking for a broker you can trust?

Join the 475.000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading