CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% 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.

Porsche IPO: Everything you need to know about the Porsche IPO

Article By: ,  Former Market Analyst

When was the Porsche IPO?

Porsche AG completed its initial public offering (IPO) in Frankfurt on Thursday September 29, 2022.

Porsche IPO valuation: How much is Porsche worth?

Porsche AG began life as a public company with a valuation of €75.2 billion after it pushed ahead with an IPO price of €82.50, at the top end of its 76.50 to 82.50 target range. That allowed it to raise around €9.2 billion, all of which will go to owner Volkswagen. That makes it not only one of the biggest-ever IPOs in Germany but in Europe.

Porsche AG was touted to target a valuation of up to 90 billion when Volkswagen first announced it was considering the IPO, but this fell as market conditions deteriorated in 2022.

Notably, some argued the IPO valuation was too high. HSBC said just weeks before the IPO that the company was worth between €44.5 billion to €56.9 billion. HSBC also said that the level of independence Porsche AG will ultimately have will be important to how the company is perceived, given that it will remain under the control of existing shareholders after listing and share its CEO with Volkswagen.

Volkswagen has said it plans to pay out 49% of total gross proceeds from the listing to shareholders via a special dividend, with the rest being used to invest in the business and drive its new strategy. Volkswagen shareholders will receive the special dividend ‘in the beginning of 2023’.

What you need to know about the Porsche IPO

Volkswagen, which has been working with Porsche since the 1960s before taking its first stake in the company back in 2009, divided the stock of Porsche AG ahead of the IPO – half into ordinary shares and the other half in preference shares.

Around 25% of the preference shares were listed as part of the IPO, which means just 12.5% of its total shares have been floated. While the ordinary shares have voting rights, the preference shares do not. This means those that invest post-IPO will own a stake in Porsche AG but have no say over how it is run.

The ordinary shares will not be listed and will remain in the hands of Volkswagen, meaning it will remain the controlling shareholder after Porsche AG is listed and continue to be consolidated into its own financial statements.

With this in mind, it is important to understand who owns Volkswagen and, in turn, Porsche AG.

Volkswagen is controlled by an entity named Porsche Automobil Holding SE (Porsche SE), which owns over a 31% stake in the business but over half of all the voting rights. Porsche SE is also a listed entity. Below is a breakdown of the ownership stake and voting rights held in Volkswagen:

Volkswagen Shareholder

Stake

Volkswagen Shareholder

Voting Rights

Porsche SE

31.4%

Porsche SE

53.3%

Foreign Institutional Investors

27.0%

State of Lower Saxony

20.0%

Qatar Holding

10.5%

Qatar Holding

17.0%

State of Lower Saxony

11.8%

Free Float

9.7%

Private Investors/Other

16.0%

German Institutional Investors

3.3%

(Source Volkswagen AG)

In turn, all of Porsche SE’s ordinary shares are in the hands of members of the Porsche and Piëch families, although it does have preference shares that are roughly split 50/50 between foreign institutional investors and German-based private investors. The Porsche and Piëch families are descendants of Ferdinand Porsche, who founded Porsche back in April 1931 but only released his first branded automobile, the Type 365, much later in 1948.

Porsche SE bought just over 25% of the ordinary shares in Porsche AG as part of the spin-off at around 88.70 per share, a 7.5% premium to the IPO price.

Ultimately, the Porsche family controls Volkswagen, which controls Porsche AG. This is important as any investors must understand that Porsche AG will remain firmly under the control of both Volkswagen and Porsche SE and that its free float will only include a fraction of its overall shares and offer no voting rights. This will make it difficult for any investor to build a significant stake in the business or push for change.

Why did Volkswagen spin-off Porsche?

Volkswagen started exploring the spin-off of Porsche AG on hopes it ‘would provide more entrepreneurial freedom to Porsche AG, while crystalizing the company’s value for Volkswagen shareholders’.

Notably, Volkswagen only touted a valuation of around EUR80 billion when the spin-off was completed and, with Porsche AG earning a similar price tag, it has created a huge amount of value overnight.

The carmaker said listing Porsche would ‘mark [the] next step in Volkswagen’s transformation from brand manufacturer to a vertically integrated mobility group, providing additional flexibility to accelerate group’s NEW AUTO strategy’ that is seeing the company invest heavily in areas like software for autonomous driving, battery technology and recycling, and charging infrastructure.

The other half of the IPO proceeds not being returned to investors will raise some cash for Volkswagen to help fund its ambitious investment plans.

Although Volkswagen is a world-renowned name, the company is made up of an array of brands spanning everyday names like Skoda to premium brands like Lamborghini, Ducati, Audi, and Bentley. Within this mix of brands, Porsche AG has been one of the most successful by focusing on quality and serving the top-end of the market. While Porsche accounted for just 3.5% of all the deliveries made by Volkswagen in 2022, the brand generated 12% of the company’s overall revenue and 26% of its operating profit.

What does Porsche do?

Porsche AG is a known around the world as a top automotive brand. Porsche AG currently has six core models available, many of which have variants. These are the 718 and 911 sports cars, the electric sports car Taycan, the luxury Panamera, and its Macan and Cayenne sports utility vehicles (SUVs).

Porsche produced over 300,000 vehicles in 2022, marking a new all-time record for the company after a steady ramp-up in output in recent years. Below is an outline of deliveries by model over the last four years:

Deliveries by Model

2019

2020

2021

2022

911

34,800

34,328

38,464

40,410

718 Boxster/Cayman

20,467

21,784

20,502

18,203

Macan

99,944

78,124

88,362

86,724

Cayenne

92,055

92,860

83,071

95,604

Panamera

32,721

25,051

30,220

34,142

Taycan

813

20,015

41,296

34,801

Total

280,800

272,162

301,915

309,884

(Source: Porsche AG)

Porsche cars are popular worldwide. Around 25% of all deliveries made in 2022 went to the Americas, with a slightly larger proportion being sold on its home turf in Europe. However, it is Asia Pacific, the Middle East, and Africa that boasts the largest demand and took 43% of all deliveries last year, with the bulk of those sales being made in its largest individual market in China.

The heart of the business is in Zuffenhausen, Germany, where the company first started. All of its engines and sports cars are built here, and Porsche says the fact it also produces its standard-production vehicles on the same lines makes it ‘unique in the entire automotive industry’. Its second core site was set up in 2022, when it opened a new factory in Saschen which today is responsible for producing the Panamera and Macan models.

Elsewhere, it has a central spare parts warehouse serving dealers around the world based in Sachsenheim, its R&D center in Weissach and other after-sales and financing operations.

The company employs almost 37,000 people worldwide.

Is Porsche profitable?

Porsche AG is profitable. The company has grown sales and profits for at least three consecutive years and generated over €37 billion in sales and €7 billion in pretax profit in 2021. Below is an outline of its financial performance over the past three years: 

Porsche AG (EUR, millions)

2019

2020

2021

2022

Revenue

28,518

28,695

33,138

37,613

Operating Profit

3,862

4,177

5,314

6,863

Pretax Profit

4,054

4,397

5,729

7,129

(Source: Porsche AG)

What is Porsche’s business model and strategy?

Porsche AG, like the wider automotive industry, is currently battling against rampant inflation and an array of other headwinds, but the carmaker has demonstrated its ability to keep growing despite the major headwinds considering delivery numbers have remained strong.

Looking longer-term, the company is currently pursuing its ‘Porsche Strategy 2030’ that aims to ensure the company addresses the significant change happening within the automotive industry, whether it be the move to electric cars or the steady move toward autonomous driving.

Porsche AG is aiming to hold its appeal as one of the most desirable car brands in the world but has committed to addressing the great change happening within the industry while preserving its high level of profitability, which sits much higher than the majority of its peers. It has said it plans to maintain a return on sales of over 15% and a return on investment of over 21%.

Notably, around 25% of all the cars it sold in 2022 were electric, with the sales proportion in Europe and China coming in noticeably higher. Although Porsche AG has made its entry into the world of electric vehicles, management have previously said that Porsche will always offer combustion engines going forward. The way it plans to counter this is by making its balance sheet ‘CO2 neutral’ and by investing in plants to create new eFuels to make petrol cleaner.

Who are Porsche’s competitors?

Although Porsche is positioned in the upper end of the market in terms of pricing, its array of vehicles ranging from sports cars to SUVs means it competes with a wide range of other carmakers across the world. For example, its SUVs compete with other German rivals like BMW and Mercedes in Europe and an even bigger pool of competitors in the US. Meanwhile, its sports cars come up against other luxury names such as Ferrari, McLaren, and Lamborghini, while other outfits like Lotus and Tesla are also competing against some of its models.

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

FOREX.com is a registered FCM and RFED with the CFTC and member of the National Futures Association (NFA # 0339826). Forex trading involves significant risk of loss and is not suitable for all investors. Full Disclosures and Risk Warning. Increased leverage increases risk.

GAIN Capital Group LLC (dba FOREX.com) 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA. GAIN Capital Group LLC is a wholly-owned subsidiary of StoneX Group Inc.

© FOREX.COM 2024