December 6, 2022

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Porsche races upwards after its historic listing of $72 billion

Porsche races upwards after its historic listing of $72 billion

  • Stocks quoted above the specified range
  • The largest list in Germany since 1996
  • Stocks rise 3% despite weak stock markets
  • An IPO is unlikely to reopen frozen markets – Banky

FRANKFURT (Reuters) – Shares in Porsche AG got off to a strong start on Thursday after Volkswagen (VOWG_p.DE) He defied volatile markets to list the 75 billion euro ($72 billion) sports car brand in Germany’s second-largest market.

Volkswagen has priced Porsche shares at the upper end of the indicated range and has raised €19.5 billion from the flotation to fund the group’s electrification drive. By 1035 GMT, Porsche AG stock was trading 3% above the issue price of €82.50.

This brought Porsche’s value to €77.4 billion, close to Volkswagen’s market value as a whole, which is worth around €80.1 billion, and ahead of competitors such as Ferrari. (RACE.MI). It is the largest list in Germany since Deutsche Telekom (DTEGn.DE) in 1996.

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In an interview with Reuters, Oliver Blume shrugged off concerns about his dual role as chief executive of both Porsche and Volkswagen, saying the decision was made “with great awareness”.

Porsche AG’s strong start came despite broad weakness in stock markets after hot German inflation data. Shares in Volkswagen and the holding company Porsche SE (PSHG_p.DE)which owns a blocking minority in Porsche AG, is down 4.6% and 8%, respectively, as investors turned.

“This is not exactly today’s IPO dream environment,” said Thomas Altmann, wealth manager at QC Partners.

The Porsche float comes at a time when European companies are facing their worst year since 2009, as investors fear a possible global recession on the back of high inflation, high interest rates and the war in Ukraine.

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A banker involved in the deal said Porsche is a one-time icebreaker for the IPO market, which will freeze again very soon.

Refinitiv data showed that companies in the region had raised $44 billion in capital market deals as of September 27, with just $4.5 billion from initial public offerings.

“There is a lot to like about the company, with its aggressive electrification plans, strong anticipated cash flow generation and premium market positioning,” Chi Chan, European equity portfolio manager at Federated Hermes Limited, told Reuters.

“However, it comes to the market at a time of unprecedented turmoil and consumer confidence is declining.”

Multi-Hope, head of capital markets (ECM) for Germany and Austria at Citi, said that despite the euphoria surrounding Porsche’s initial public offering, it would still be challenging for further listings.

Porsche vs competitors

Porsche CEO Bloom, whose dual role as new head of Volkswagen drew criticism from some investors, hailed the listing as a “historic moment” as he hugged his colleagues and rang the bell in a crowded Frankfurt stock exchange.

Volkswagen said market volatility was precisely why fund managers badly needed a stable, profitable business like Porsche AG to invest in.

“Porsche has been and remains the pearl of the Volkswagen Group,” said Chris Oliver Schickentans, chief investment officer at Capital, fund manager. “The IPO made very transparent the value the market brings to Porsche.”

Faced with costs running into tens of billions of software and a radical shift toward electric mobility, Volkswagen executives have long considered listing Porsche, a move executives hope will raise much-needed cash and raise Volkswagen’s value.

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The Porsche and Bich families, whose holding company Porsche SE controls Volkswagen, will in turn consolidate their control of Porsche AG because they will own 25% plus one ordinary stake – carrying voting rights – in the sports car brand.

As many as 113,875,000 preferred shares of Porsche, which carry no voting rights, were sold in the initial public offering.

Bank of America, Citigroup, Goldman Sachs and JPMorgan acted as joint global coordinators and joint bookrunners for the transaction, while Mediobanca acted as financial advisor to Porsche.

(1 dollar = 1.0339 euros)

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Additional reporting by Victoria Waldersi, Emma Victoria Farr, Hakan Ersin, Christoph Stitz, Alexander Hubner, Sinead Cruz and Pamela Barbaglia; Written by Victoria Waldersi and Mathias Williams; Editing by Jane Merriman, Mark Potter and David Goodman

Our criteria: Thomson Reuters Trust Principles.