German carmaker Volkswagen (VW) is planning to float a minority stake in premium car and sports vehicle manufacturer Porsche. The IPO could turn out to be one of the largest in Europe.
Could the unfriendly market environment be an opportunity for Porsche?
The timing for an IPO does not seem to be the best. Markets are in the midst of gigantic declines, which most likely resulted in a wave of pessimism among investors around the world. The volume of initial public offerings in the US alone has fallen significantly since 2021. After six months, we are down to just 10% of the volume of a year ago.
In such a period, companies are usually accompanied by lower valuations, measured, for example, by P/E (earnings per share) or EV/EBITDA (enterprise value divided by EBITDA) multiples. However, in the case of Porsche, this factor may have a reduced impact.
The company has the chance to distinguish itself from other IPOs with a great brand and interesting prospects for the production of luxury electric cars, gaining strong investor interest and thus a higher share price. However, it is hard to determine how strong a factor this might be.
However, VW authorities seem confident of success. “We have shown a huge resilience, especially in crisis times,” VW and Porsche CEO Oliver Blume told reporters on Tuesday. “Looking back on the corona crisis, the semiconductor crisis, this year with the Ukraine conflict, we always have been able to show very high-profit margins, and we think this will be very convincing.”
One of the biggest IPOs in Europe?
According to Bloomberg data, the first phase of the IPO is expected to start as early as this month, unless the market situation deteriorates significantly, Volkswagen said in a statement. The process is expected to be finalized by the end of this year. The share offering would allow VW to raise additional capital, which may be needed to rapidly develop its electric vehicle line-up and create the necessary software.
The IPO is valued by Volkswagen at €85 billion. This would make Porsche the largest IPO in European history. The sports car manufacturer has reportedly already secured investments in the range of 60 and 85 billion euros. The IPO will be possible by a firm agreement between interest groups at VW: the Porsche and Piech families, the trade unions and the state of Lower Saxony (which owns 20% of VW's voting shares).
On the Conotoxia MT5 platform, VW shares had gained almost 8.6% since the start of the trading session on Monday by 13:00 GMT+3 on Wednesday. According to MarketScreener, the company has nine buy recommendations, including ones from UBS and JPMorgan with target prices of €230 and €235 respectively.
Rafał Tworkowski, Junior Market Analyst, Conotoxia Ltd. (Conotoxia investment service)
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