By Steve Goldstein
The German stock market will get a momentary reprieve from the relentless focus on gas supplies when sportscar maker Porsche goes public on Thursday.
The IPO is set to be the second largest in German history, and potentially the third-largest in Europe.
Porsche is being spun out of Volkswagen /zigman2/quotes/203434344/delayed XE:VOW3 -0.97% , which itself is mostly held by Porsche Automobil Holding /zigman2/quotes/202769371/delayed XE:PAH3 -1.09% , the investment vehicle of the founding Porsche and Piesch family. In a nod to its most famous product, Porsche has been split into 911 million shares.
Volkswagen late Wednesday said it had priced the IPO at €82.50 a share, at the top of the range.
That holding company, also called Porsche SE, will buy 25% plus one share of Porsche AG, at whatever the IPO price is, plus another 7.5%. Another 25% of Porsche AG will be sold by VW into the market, but not carry voting rights, with the ticker symbol P911.
VW had indicated a price range of €76.50 to €82.50 per preference share.
VW is planning to distribute 49% of the proceeds in a special dividend. The rest will help VW’s push into electric vehicles as well as software development.
Qatar’s investment authority, Norway’s sovereign-wealth fund and T. Rowe Price Group Inc. /zigman2/quotes/203200152/composite TROW -3.13% are among the investors to have committed to the Porsche IPO.
More an SUV maker
Porsche last year earned €4 billion on revenue of €33.14 billion. Its return on sales, its operating profit excluding the diesel penalty of 2019, reached 16% last year, and its earnings before interest, taxes, depreciation and amortization (Ebitda) margin was 24.5%. Ferrari /zigman2/quotes/208128355/composite RACE -1.00% /zigman2/quotes/200586103/delayed IT:RACE +0.14% sported a margin of 35.7% last year.
“The main question for potential shareholders in Porsche is whether the company can make a successful transition to become fully EV while preserving or even expanding margins. It is clear when you compare Porsche to Ferrari that there is room for improvement and a potential upside if Porsche can improve its operations and expand on its already strong brand,” said Peter Ganry, head of equity strategy at Saxo Bank.
Though known more as a sports maker, over half of vehicle sales the last three years have been in the sport-utility vehicle segment, under the Cayenne and Macan families. In 2024, it’s planning to deliver a battery electric vehicle version of the Macan, as it targets 50% of vehicle deliveries in 2025 being electrified vehicles, and 80% by 2030 being BEVs.
Porsche is dependent on the fortunes of the world’s wealthy. “Especially in economic downturns, demand for the Group’s products may be reduced as customers may shift from buying luxury sports vehicles to buying vehicles in less expensive segments,” its IPO notes.
The entry model of the 911 sports car costs €113,500 in Germany, according to the IPO prospectus. The cheapest Porsche — the 718 — costs a cool €59,200.
Reliant on natural gas
Porsche said it’s not immune from the struggles of third-party suppliers. And it’s exposed to the energy difficulties of its home country with its need for both natural gas as well as renewables such as biomethane. Most of its vehicles are made in Germany and Slovakia.
Shipping to its largest market, China, has become more expensive as the Russian-Ukraine war has made it impossible to ship by rail. Porsche has stopped exporting to Russia, and the war has driven up costs on raw materials as well as parts made in Ukraine, such as wire harnesses and steel products.
The joint global coordinators and bookrunners are Bank of America /zigman2/quotes/200894270/composite BAC -2.23% , Citigroup /zigman2/quotes/207741460/composite C -2.20% , Goldman Sachs /zigman2/quotes/209237603/composite GS -1.67% and J.P. Morgan /zigman2/quotes/205971034/composite JPM -1.75% . Scores of other banks also are participating in the IPO.