Volkswagen is testing the market’s appetite for luxury with the €9.4 billion IPO of Porsche

Volkswagen intends to raise up to €9.4 billion from the IPO of its iconic sports car maker Porsche, in what could be Europe’s biggest listing in more than a decade.

The German carmaker said late Sunday it was targeting a valuation of between €70 billion and €75 billion for the listing, below a previous top-end target of up to €85 billion, with the deal coming at a time of profound market upheaval.

European markets were largely closed to IPOs for most of the year, as the region’s energy crisis, rising interest rates and record inflation shrank from companies seeking public listings.

Porsche isn’t the only one trimming valuation targets as Intel lowers expectations for Mobileye’s IPO.

Amid the stock market slump, the IPO plan is getting a boost from firm commitments from key cornerstone investors. The Qatar Investment Authority, Norway’s sovereign wealth fund, T. Rowe Price and ADQ are to subscribe for up to 3.7 billion euros worth of preferred shares, the manufacturer said.

“We are now on the home straight with Porsche’s IPO plans and welcome the commitment of our cornerstones,” said VW CFO Arno Antlitz. The offer period begins on September 20th with a planned start of trading on September 29th.

At meetings with potential investors, VW presented the listing as an opportunity to invest in a company that brings together top automotive competitors like Ferrari and luxury brands like Louis Vuitton. While both Ferrari and Porsche target wealthy buyers, the Italian manufacturer remains in its own league with industry-leading margins and a fraction of Porsche’s 300,000 annual sales.

At the midpoint of preferred stock’s valuation point, the IPO would value Porsche at 10.2 times earnings before interest, taxes, depreciation and amortization, according to Jefferies. This compares to 23.1 times Ferrari’s EBITDA. Nevertheless, the upper valuation range of Porsche corresponds almost to the entire market value of VW – consisting of Audi, Skoda, the VW brand and Seat – of 88 billion euros.

Aside from offering investors a piece of one of the most recognizable names in automaking, the IPO will return significant decision-making power to the Porsche-Piech family, which lost control of the sports car maker more than a decade ago after a long takeover battle with VW. To accommodate the interests of the billionaire family, which holds 53 percent of VW’s voting shares through separately listed Porsche Automobil, Porsche’s IPO is complex and has raised governance concerns that mirror concerns about VW’s convoluted structure.

Investors can subscribe for 25% Porsche preference shares without voting rights. The family will buy 25 percent plus one of Porsche’s voting common stock, meaning they get a minority stake and can influence important future decisions. The family has agreed to pay a 7.5 percent premium over the preferred share price range and plans to fund the acquisition with a mix of debt of up to €7.9 billion and a special dividend paid by VW.

Proceeds from the deal will help VW fund its transition to electric vehicles and invest in software, the automaker says.

While interest in the IPO has been high, some investors have said that the appointment of Oliver Blume, Porsche’s CEO, to head VW and the plan for him to remain in a dual role raises questions about Porsche’s future independence. Volkswagen is testing the market’s appetite for luxury with the €9.4 billion IPO of Porsche

Fry Electronics Team

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