Porsche IPO Puts Founding Family in the Driver's Seat
Offering will give public access to 12.5% of shares, but they'll get no vote
You might not be able to buy a Porsche, but you'll soon have the chance to own a part of the company.
Parent company Volkswagen (DE:VOW3, US:VWAGY) said on Monday that it would launch its plan to sell 12.5% of the iconic German luxury sports car firm in an initial public as soon as this month, valuing the company between $60 and $85 billion.
Porsche also said it's selling 12.5% of Porsche's capital directly to the Porsche family heirs, who are VW's largest shareholders.
The publicly offered shares have no voting rights, while the Porsche heirs' shares do.
Volkswagen said the proceeds would help it finance the transition to electric vehicles, and 49% would go to shareholders as a special dividend.
The move surprised many in the market who expected the company to postpone the deal and wait for better market conditions. Stubborn inflation and global economic strain, coupled with the war in Ukraine, have created a messy market, and IPOs have been few and far between.
But Volkswagen may not be taking a huge risk. Porsche is a high-end company, and while spending patterns at more modest income levels are strained, luxury and rarified goods makers and dealers are doing land office business.
"This is a historic moment for Porsche," Volkswagen and Porsche Chief Executive Officer Oliver Blume said.
Porsche sales rose 11% in the last business year and passed 300,000. That's just three percent of VW's passenger car sales, but it accounts for half of the company's passenger car pretax profit.
So, the several billion dollars it will earn from the offering will fund further development of its all-electric Taycan and transition to 80% electric across Porsche's lineup by 2030.
Porsche's revenue hit EUR33.1 billion last year and returned 16% on sales.
The Wall Street Journal reported Tuesday that the family investment fund, Porsche SE, also agreed to pay VW a 7.5% premium above the IPO price. The family's stock holdings now give Porsche SE effective control of board decisions.
News reports earlier this summer said VW planned to launch a new electric SUV and a pickup truck to introduce its new Scout brand.
Volkswagen wants to crack the US's highly profitable truck and SUV market, bolstering its international presence as parts of the world economy slow more than others.
VW's US sales fell sharply in the first quarter, and the company has only a five percent share in the market. Now the company will have some capital to put behind the growth push.
A successful strategy could make VW a direct rival to US off-roading mainstays like Ford and General Motors. VW would also compete with electric vehicle startups like Rivian. As per recent reports, VW would like to sell around 250,000 Scout vehicles a year in the US once production, estimated for 2026, begins.