Porsche goes public, and the "biggest IPO in automotive history" is coming

Porsche goes public, and the "biggest IPO in automotive history" is coming

Volkswagen Financial Officer Arno Antlitz said Volkswagen would provide the market with an update on the launch and a timeline in late summer. This means that Porsche could complete its IPO as soon as the fourth quarter of 2022.

Volkswagen has reportedly set up a dual shareholder structure for Porsche, paving the way for its IPO. Specifically, Porsche's shares will be divided equally between common shares and non-voting preferred shares, after which 25% of the shares will float at an expected valuation of 80 billion to 90 billion euros

Porsche, Volkswagen's rare "quality asset"

Porsche cars have always been regarded as the "treasures" of the Volkswagen Group.
Among traditional automakers, Porsche is pretty much the only brand that can keep profit margins above 15 percent. It can be said that Porsche is a rare "high-quality asset" among the many subsidiaries of Volkswagen.

In fact, the Volkswagen Group sells about 9 million cars a year, and Porsche delivers a third of the former (about 300,000) but makes up a quarter of the group's overall profits.

The electrification debut helped Porsche cement the title. In 2021, Porsche launched its first pure electric supercar, the Taycan, and executives never expected it to sell 41,000 units. You know, Porsche has only fluctuated around 250,000 to 300,000 models in the past three years. This makes many foreign media believe that the Taycan is the most potential to replace the 911 as a generation of classic sports car series.

Despite this, the Volkswagen Group decided to let Porsche IPO independently, with the aim of allowing the Porsche-Piëch family to sell its Volkswagen shares and hold Porsche shares instead.

The Porsche-Piëch family currently holds a 53.3 percent stake in the Volkswagen Group through Porsche Automobil Holding SE.

It has long been reported that the Porsche-Piëch family is willing to reduce its stake in the Volkswagen Group, but only if it maintains the status of the largest single shareholder, and its shareholding ratio is at least higher than that of the Qatar sovereign fund (14.6%) and the German state of Lower Saxony ( 11.8%).

To this end, Herbert Diess is preparing a sale plan as early as 2021. According to reports, Diess has been carrying out a major restructuring of the group and shareholder structure for more than a year. If the Porsche IPO goes well, Volkswagen could use the funds raised to help itself with its digitization and transition to electric vehicles.
According to current news, Volkswagen will seek to raise at least 20 billion euros by selling about a quarter of Porsche's shares. At that time, Porsche's valuation will be fired to between 80 billion and 90 billion euros. You must know the market value of the Volkswagen Group some time ago. The minimum is only 110 billion euros.

Previously, Volkswagen planned to invest 35 billion euros in electrification and 270 euros in digitalization by 2025.

Diess has repeatedly conveyed confidence to the market that there is enough capital to complete the electrification transition, but shareholders are concerned that Volkswagen's 15 billion euros of free cash flow per year is not enough to support the plan. Diess is believed to have underestimated rising battery raw material prices and the cost of building a battery plant. In addition, electrification requires more expensive R&D and acquisition costs than expected - a planned layoff is inevitable.

Therefore, Volkswagen urgently needs to complete the "delivery" of Porsche to obtain 20 billion euros of cash.

VW-Porsche feud

Why did you say that the Porsche IPO was just an insider deal between the Volkswagen Group and the Porsche-Piëch family? Here is a piece of history.
On October 23, 2007, the European Court of Justice ruled that the implementation of the "Popular Law", which restricts the free movement of capital in the European market, is illegal.
Previously, in accordance with the provisions of the "Volkswagen Law", no matter how much equity Volkswagen shareholders hold, their voting rights cannot be higher than 20%.

At that time, Porsche already held 31% of the shares of the Volkswagen Group, but essentially had little say in the group.

In September 2008, Wolfgang Porsche, the grandson of Porsche's founder, led the company to aggressively acquire the shares of Volkswagen Group, and the shareholding ratio once reached 35.14%, hoping to promote Porsche SE to become a company of Volkswagen Group.

What was supposed to be a smooth acquisition was shattered by a resolution promoted behind the scenes by his cousin Ferdinand Yesch, and Wolfgang's acquisition dream was shattered.

During the financial crisis, Porsche signed a debt of up to 10 billion euros. Piyech took the opportunity to counterattack and successfully acquired Porsche in 2009.
In the end, the Volkswagen Group acquired a 49% stake in Porsche for 3.9 billion euros, and then the Volkswagen Group completed its 100% holding of Porsche in 2012.

After several months of "takeover and anti-takeover" battles between Porsche and Volkswagen ended, Porsche Holding finally held 52.2% of Volkswagen's common shares (31.4% of subscribed shares) and became the largest single shareholder of the Volkswagen Group.
As of February 2022, news emerged that Porsche Holding was considering selling part of its 53.1% stake in Volkswagen AG for a substantial stake in Porsche. It is possible that they would buy all the common shares issued, leaving Porsche with only 12.5% ​​of free float.

Volkswagen's electrification progress

The transformation of traditional car companies is undoubtedly the heaviest burden.

On July 13, 2021, Volkswagen announced that it plans to start the development of the mechatronics platform SSP, standard batteries, charging and energy-supplying network, and technologies related to autonomous driving, and has set a timetable for this. In the new car sales in the market, the penetration rate of pure electric vehicles should reach more than 70%, and the penetration rate of pure electric vehicles in the Chinese and American markets will also reach 50%.

In 2021, Volkswagen's pure electric ID. series will launch 5 models in China in one go, namely ID.4 CROZZ, ID.6 CROZZ of FAW-Volkswagen and ID.4 X, ID.6 X, and ID of SAIC-Volkswagen .3. However, the monthly sales of the five models are only over 10,000 units. Compared with "Wei Xiaoli", Great Wall, and BYD, which entered the new energy market in the early days, their performance is not satisfactory, and it is even more difficult to compete with such a strong opponent as Tesla. Compare.
In order to obtain stable supply, in 2020, Volkswagen Group will become the largest shareholder of Guoxuan Hi-Tech, China's third largest lithium iron phosphate battery supplier, through share conversion and fundraising, accounting for 26.47% of its total share capital.

Recently, there has also been news that Volkswagen Group is negotiating with Huawei's autonomous driving department. The former plans to buy Huawei's related autonomous driving technology for 3 billion euros.

Compared with Tesla's mature three-electric technology and autopilot software, Volkswagen wants to successfully catch the last train of electrification, and there is still a huge technical gap to be filled, and this gap also forces Diess and other executives to pour in. valuable cash resources to make up for it.
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