Volkswagen looks to IPO of Porsche to ignite its EV shift
Volkswagen is preparing an initial public offering of Porsche, seeking a listing of its most profitable asset to help boost the parent’s valuation and fund the push into electric vehicles.
Under a plan code-named Phoenix, the carmaker and Porsche Automobil Holding, the main investment vehicle of the billionaire Porsche and Piech family, have sketched out a framework that navigates VW’s convoluted structure. Investors could be offered about 25% of nonvoting shares in the iconic sports car maker while the family buys a minority blocking stake, according to people familiar with the deliberations.
The tentative listing, estimated to value the sports car brand at as much as $96 billion by Bloomberg Intelligence, would partly reverse a tumultuous takeover of Porsche more than a decade ago and signals the extent of the upheaval sweeping the industry.
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Although details and the timing remain in flux, the IPO could happen in the second half of this year and might include a special dividend to help the Porsche and Piech family, which owns 53% of VW voting shares, finance the transaction, said the people, who spoke on condition of anonymity.
A spokesman for VW declined to comment. The company’s preferred shares surged as much as 10% after the announcement Tuesday on a possible IPO outline.
Governance tension
Going ahead would require walking a tightrope between key shareholders that own almost all of the group’s voting stock and external investors under VW’s complex governance structure. The owner family, the German state of Lower Saxony and Qatar together control about 90% of voting rights.
The tension probably would continue at a new listed company under the current plan. While external investors would own only nonvoting shares, the Porsche and Piech owners would retain far-reaching influence through 25% of common stock with voting rights plus one share, according to two people familiar with the plans.
Europe’s biggest carmaker has been pushing for years to adopt a less centralized corporate structure to become more nimble and step up its challenge to Tesla Inc. Success has been modest. The IPO of Traton, VW’s truck-making unit, fizzled amid internal ructions and a limited free float, and a plan to separate the Lamborghini supercar and Ducati motorcycle brands didn’t progress.
Volkswagen’s management and supervisory boards still have to sign off on the framework agreement with Porsche and a final decision hasn’t yet been made, the carmaker said.
Although VW Chief Executive Herbert Diess appeared to pour cold water on a Porsche listing about a year ago, he’s under pressure to start catching up to Tesla. After a well-received presentation of VW’s accelerated EV plans in March of last year and successful models such as the Porsche Taycan, efforts have sputtered and its market valuation remains dwarfed by the U.S. EV leader.
Support for the push would be hard won even as industry momentum for bold moves is building. VW’s 20-member supervisory board is prone to convoluted decision-making. Worker representatives, who account for half the seats, are often aligned with the two officials from Lower Saxony to protect jobs. The sprawling Porsche-Piech clan, the biggest backer of Diess, also needs to coalesce to greenlight major strategic overhauls.
Diess’ consideration of deep job cuts sparked a backlash from unions late last year, putting the CEO on the defensive. In the end, VW agreed to a compromise that included a plan for a $905-million tech campus and a pledge to build a new EV factory near its Wolfsburg headquarters.
“We think a Porsche IPO, which has been a hot topic of discussion for years, is now more of a possibility of actually happening than ever before,” RBC analyst Tom Narayan said in a note. “What is different now however is that the Porsche family is firmly behind it as we expect Porsche SE to be a buyer of a Porsche brand IPO.”
A plan to list Porsche chimes with deep restructurings elsewhere among traditional carmakers and suppliers. In the latest example, Ford Motor Co. is looking at ways to separate its electric-vehicle operation from its century-old legacy business to unlock value.
Going ahead would boost Europe’s flagging IPO market. Share sales have slowed dramatically this year, after a record-setting 2021. Steep market swings are deterring issuers as investor appetite has dried up amid concerns about geopolitical tensions in Europe as well as tightening monetary policy.
Many that have braved volatile markets including Norwegian oil and gas company Var Energi have had to settle for bottom-end IPO pricing and a subdued start to life on the public market. Portfolio managers have become more selective after the poor performance of last year’s marquee listings and the shelving of several recent deals.
Funding options
Separating Porsche could offer a new funding option for the group. VW largely relies on generating enough cash on its own or issues bonds. Its convoluted shareholder structure limits options to raise fresh equity capital as Tesla has done, without diluting shares of key stakeholders that control about 90% of VW’s voting stock.
The two companies share a common history dating to the late 1930s and have been formally tied together after a protracted battle for control. Porsche first sought to buy VW little more than a decade ago, before the audacious coup failed and the far bigger manufacturer turned the tables, taking control of the sports car maker in 2009. A remnant from that acrimonious saga is Porsche Automobil Holding, which has a voting stake in VW of about 53%.
Porsche is the most iconic brand in VW’s stable and is highly profitable, among other nameplates such as Audi, Skoda and Bentley. Creating the multi-brand structure was the brainchild of Ferdinand Piech, the influential CEO and chairman of VW who engineered the Porsche takeover despite opposition from his cousin, Wolfgang Porsche. Piech passed away in 2019 at age 82.
Bloomberg writers Benedikt Kammel and Swetha Gopinath contributed to this report.
