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IPO Focus: Porsche AG

  • Public Equity
  • Consumer
  • Europe

Based on Forum Interviews, IPO Focus offers expert insights into the companies behind some of the most notable initial public offerings (IPOs) of 2022.

Will Porsche reap benefits outside the Volkswagen family?

Volkswagen Group (VG) continues to drive forward with the possible IPO of its iconic sports car brand Porsche.  The German automaker has reportedly chosen Goldman Sachs Group Inc., Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc. as joint global coordinators for the anticipated share sale.1https://www.bloomberg.com/news/articles/2022-03-30/volkswagen-is-said-to-select-banks-for-porsche-sports-car-ipo 

Analysts suggest the move could value Porsche at as much as EUR 90bn,2https://www.ft.com/content/6a858647-0e39-4fad-9ca3-9cb70ff34f23 making it one of the largest IPOs in German history. After years of resisting such a sell off, this IPO Focus draws on expert insights from a former director at Aston Martin Lagonda to understand why Volkswagen has decided to sell shares in one of its most prized assets.

Our specialist told Third Bridge Forum that Porsche continues to produce “very good results”, selling 300,000 units in 2021. This could have been more, the specialist told us, had it not been for global supply chain issues, which have created a 10-month waiting list for customers. The Russia-Ukraine conflict is likely to increase those problems short term, the specialist said, as it looks to source new suppliers. 

Despite the waiting list, the specialist does not envisage volumes rising above 300,000 by the end of the decade. Instead, volumes could drop to 280,00 in 2023 and 2024 as Porsche transitions from internal combustion engine cars to electric vehicles. The specialist does not envisage any sizable organic growth over the next decade from electrifying its models, which are likely to make up 60% of Porsche’s total volume by 2025 and rising to 80% by 2030. 

The specialist told us volumes could increase if Porsche adds a new segment to its product range. A mid-engine segment could add 10,000 units, they said, highlighting it as an area with “strong growth, high revenues and high margins”. Porsche had previously steered clear of manufacturing mid-engine cars due to its affiliation with the Volkswagen Audi Group (VAG), which owns mid-engine manufacturers Lamborghini and Audi, we were told. 

“Bigger Volkswagen Audi Group companies might want to take priority over Porsche so it’s those sort of challenges. It’s being seen as outside the family than inside the family. I think that’s probably going to be one of the bigger challenges.” – A former director at Aston Martin Lagonda describes the challanges of Porsche’s IPO.

Leaving VAG should therefore give Porsche the “freedom” to pursue strategies that are beneficial for its brand, the specialist said. Porsche will likely remain part of VG’s Premium Platform Electric (PPE), which the specialist said will allow it to benefit from VG’s purchasing power when sourcing supplies through this platform.

However, sitting “outside the family” could also bring challenges, the specialist warned. Porsche will likely have less access to VAG’s technology and services, such as wind tunnels and test tracks. For Porsche supplies that do not fall inside PPE, it will also likely lose the “purchasing muscle” it would have had as part of VAG, and could fall down the pecking order if problems occur with Volkswagen-made supplies.

While Porsche accounts for a quarter of VG’s profits,3https://www.ft.com/content/1993c417-a284-4a1e-af84-7db920e3c73c the specialist said Volkswagen is going ahead with the share sale in order to fund the “staggering level of change” that will hit the automotive supply chain over the next five years.

And, as reports emerge that VG is to focus “on quality and on margins, rather than on volume and market share”,4https://www.reuters.com/business/autos-transportation/vw-scrap-models-focus-premium-market-cfo-tells-ft-2022-04-06/ Porsche might not be the only IPO to watch from the German automaker as it considers the future of its other luxury brands.

For more human insights on Porsche and the Volkswagen Group, click on the transcripts below.

Related Transcripts

The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.

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