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Porsche IPO: Will Volkswagen shareholders benefit from $85bn windfall due to VW?


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VW will look to emulate Fiat's success in spinning off its own Ferrari sports brand - Photo: Volkswagen

Volkswagen (VOW3) officially demerged from its luxury car division Porsche on Thursday. Trading under the stock ticker, P911, VOW3 is hoping that this flotation will help  'unlock the potential' of the iconic sports car manufacturer.

Shares are trading at €82.5 (£79.32) per share, which is the top end of the initial range given at the start of the month. 

"Porsche Group (P911) has successfully crossed the finish line of its initial public offering (IPO). With the ringing of the bell at the Frankfurt Stock Exchange this morning, Porsche, one of the world's most successful sports car manufacturers, is entering a new era with increased entrepreneurial flexibility," Porsche said in a statement. 

This spin-off of Porsche (P911) makes it one of Europe’s largest stock market floats on record, according to data from Refinitiv and with Europe heading for a potentially deep recession, and with the Stoxx 50 index, on which Volkswagen shares are listed, down by 32% year-to-date, this listing could not have come at a better time. 

But VW (VOW3) shareholders could likely do with some good news, with it's share price down this year due to loss of production as suppliers of parts – particularly semiconductors - struggled to fulfil orders in the wake of Covid-19-related lockdowns.

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Volkswagen (VOW3) share price chart

What's in it for VW shareholders?

At the top end of the potential valuation, the flotation of Porsche shares could be worth a whopping $85bn – indeed, it was recently reported that the shadow order book, which compiles offers of interest from institutional investors, was nearly full with offers at the top price.

Volkswagen has not yet specified how much it hopes to make from the deal, but has said that it intends to pay 49% of the proceeds in a special dividend to all shareholders.

Volkswagen itself, thinks the IPO would unlock value for both its, and Porsche AG shareholders and, through its retention of 12.5% of the preference shares, which carry the shareholder voting rights, VW (VOW3) would remain in overall control of Porsche.

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Will the IPO be a success?

But it's difficult to predict how successful the IPO would likely be, given current global equity market stresses.

When Fiat (now a subsidiary part of Stellantis) moved to spin-off its most iconic brand Ferrari in 2015, Fiat's majority owners, the Agnelli family hit better timing, with global markets in a period of broad uptrend, low inflation and low interest rates.

Since that 2015 IPO, Ferrari shares – which debuted at €43 – have more than quadrupled in value to today's price of €195

Investment advisor Patrick Kronemam, writing on Seeking Alpha, believes that Volkswagen (VOW3), could unlock similar value with the Porsche IPO.

"Porsche AG (P911has less profit margins and may not be as elusive as Ferrari, but produces a lot more cars per year. And with that, money," he says.

"The Agnelli family has clearly shown the way in how to unlock value from their automotive conglomerate. Volkswagen is now following in those footsteps and will bring a legendary brand of sports car to the stock exchange."

Porsche Group (P911) share price chart

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