Analysis: Porsche faces a surge in the race for public listing

  • War and crashing markets add hurdles to automaker’s IPO
  • A steep price discount is likely to succeed – sources
  • Historic list comes as German automakers seek to go electric

LONDON, July 20 (Reuters) – Porsche could be forced to go public at a steep discount if it insists on moving forward as economic hurdles mount, two people involved in the historic listing have said. several billion euros.

The prospect of a bigger-than-usual discount would be a setback for controlling families pushing the initial public offering to fund a costly transformation from gas-powered sports cars to electric sports cars.

Initial expectations were high for the luxury car brand owned by Europe’s largest automaker, Volkswagen (VOWG_p.DE). Some had valued Porsche at more than 80 billion euros ($81.89 billion), according to the bankers involved.

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But those involved said a larger-than-usual markdown may now be needed to secure what could be one of the world’s biggest stock market debuts – in the face of war, the threat of recession and shortages. of energy.

Porsche might have to settle for just 60 billion euros, one of the people said, noting that the owners would accept nothing less.

People have shared their assessment, amid a wider debate over the price of one of Germany’s most prestigious brands that is taking place weeks before the planned IPO.

One of the people said that owners of the fast car maker had different views on how much value to place on it. A third person involved in the preparations said investors had yet to agree on a valuation formula.

This week, Porsche’s senior management presented its business plans to investors. Chief Financial Officer Lutz Meschke told reporters the automaker was “financially resilient” and “well prepared for further steps.”

Porsche estimated its revenue at more than 38 billion in 2022, compared to 33 billion in 2021, despite a 5% drop in deliveries in the first six months of this year. Read more

Behind the scenes, however, some investors are hesitant.

Bernstein Research last month put a wide range of possible valuations on Porsche, from 55 billion euros to 100 billion euros.

He pegged ‘fair value’ at around 75 billion euros, based on a formula including earnings before interest and tax (EBIT), calling Porsche a ‘great company but not Ferrari’ due to higher margins of the latter.

One of Volkswagen’s top 20 shareholders told Reuters he was not in favor of the IPO because only a small amount of shares will be sold, giving new shareholders little leverage.

The shareholder, asking not to be named, said Porsche had better stay with the Volkswagen Group while the IPO would not “create value” in the long term.

Earlier this week, Porsche chief executive Oliver Blume and Meschke were upbeat in their presentations.

Business has been robust during the pandemic, Blume said. “There is a great need in the capital markets and a lot of money to invest.”

The bankers in charge of the deal intend to investigate market conditions at the end of August, with a decision from Porsche’s board of directors and an intention to float document (ITF) potentially ready for release soon after, and a view of trading on the Frankfurt Stock Exchange at the turn of the third to fourth quarter, people said.

A Porsche spokesman said there were no “new decisions” on its IPO plans, while Volkswagen declined to comment.

SWITCH

The listing comes as German automakers seek to loosen ties to diesel and gasoline engines that have won worldwide acclaim and switch to quieter, cleaner battery models.

Porsche wants 80% of its car sales to be electric by 2030, roughly quadrupling the current level, while Volkswagen has also embarked on an ambitious shift to electric vehicles, batteries and software. The list is designed to fund this overhaul.

If the registration does not go ahead or only succeeds with a discount, there is less to invest.

A listing would also shift the balance of power at Europe’s biggest automaker, Volkswagen, which has controlled Porsche since a failed VW takeover bid more than a decade ago. At the time, the Porsche and Piech families became Volkswagen’s most influential investors.

An IPO would give Porsche and its family owners greater control over the sports car maker, the company said.

However, the economic obstacles are considerable.

According to data from Refinitiv, only $2.3 billion has been raised in German equity markets this year, down 90% from the previous year. Only 12.5% ​​of Porsche shares will be in “float”, and valuations of European automakers have plunged since the start of 2022.

Luxury automakers have been particularly hard hit. Aston Martin’s market cap has lost 57% of its value since the start of 2022, while nearly a third has been slashed from Ferrari’s valuation.

An involved banker said Porsche could be compared to highly rated luxury brands, such as French luxury goods house LVMH (LVMH.PA), but it still remains in the shadow of Tesla Inc (TSLA. O).

($1 = 0.9769 euros)

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Additional reporting by Christoph Steitz in Frankfurt, Victoria Waldersee in Berlin and Lucy Raitano in London; edited by John O’Donnell and Richard Chang

Our standards: The Thomson Reuters Trust Principles.

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