Investors mixed as Porsche seeks price of up to $75 billion

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  • Volkswagen stock little changed, Porsche SE up 3.5%
  • Porsche AG will be listed at 70-75 billion euros
  • IPO comes amid turmoil in European markets
  • Leading investors committed to 40% of share offering

BERLIN, Sept 19 (Reuters) – Shares of Volkswagen (VOWG_p.DE) hovered around breakeven on Monday, reflecting a mixed response from investors to the automaker’s IPO plans for sports car brand Porsche AG in what could be the third largest initial public offering in Europe.

Volkswagen said on Sunday it was targeting a 70-75 billion euro ($70-75 billion) valuation for Porsche AG, slightly below some estimates of up to 85 billion euros, but far exceeding the price of 49 billion euros for rival BMW (BMWG.DE) and Mercedes-Benz (MBGn.DE) 61 billion euros.

Porsche AG aims to woo investors with its success and high margins, even as the shares of other luxury car makers like Ferrari (RACE.MI) and Aston Martin (ASTON.UL) have suffered this year from the tumult of European stock markets. .

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But the listing structure, in which Volkswagen’s largest shareholder – Porsche SE (PSHG_p.DE) – will receive a 25% blocking minority plus one of the voting ordinary shares, has drawn criticism from some fund managers. . Read more

The IPO will feature 25% preference shares, which have no voting rights, meaning stock investors will only own 12.5% ​​of Porsche AG’s capital and will have little say.

Porsche SE, the holding company of the German Porsche and Piech families, will pay a premium of 7.5% for the shares it receives in the listing. But he will be treated as if he owned the stake even before that premium was transferred, according to the IPO prospectus released on Monday.

Shares of Porsche SE rose 3.5% in afternoon trading.

Market value: Porsche’s rivals

GOVERNANCE UNCERTAINTIES

The prospectus lists the risks the sports car brand faces, ranging from unstable energy supply and supply chain shortages to difficulties managing the relationship with Volkswagen and Oliver’s dual role Blume as CEO of both companies.

Nonetheless, the listing has attracted high-profile investors including Qatar Investment Authority, which is buying 4.99% of the offering; the ADQ of Abu Dhabi, which is investing 350 million euros; as well as T. Rowe Price (TROW.O) and the Norwegian sovereign wealth fund, investing 750 million euros each.

“Our starting point is that we still want to be able to vote,” said Carine Smith Ihenacho, head of governance and compliance at the Norwegian fund.

“We do, however, own shares in a number of companies where shareholder rights are weaker than we would like…voting rights are not the only way to exert influence, however,” Smith Ihenacho added. in a statement to Reuters.

Shares of Volkswagen, which some analysts say could unlock value for its own shares by listing Porsche AG, were little changed at 1556 GMT, after rising 3% in premarket trading.

Uncertainties around the governance of the two companies could explain the markets’ lack of enthusiasm, said Ingo Speich, head of sustainability and corporate governance at Deka Investment, one of Volkswagen’s top 20 investors. Read more

“If the split of two companies improves the quality of management and the strategic focus of a business, that will be reflected in the valuation,” Speich said. “It is fundamentally right that Porsche AG should become more independent – but it is not an independent organization.”

Oliver Blume will split his working capacity 50-50 between the two companies, according to the prospectus.

He will be fully paid by Volkswagen until the end of the year and will then receive around 60% of his salary from the group, with the remaining 40% being paid by Porsche AG, reflecting the different pay levels at the two companies.

Analysts compared Porsche AG stock to Ferrari, which has a market capitalization of 38 billion euros but an operating margin of 24% compared to Porsche’s 17-18%. The German manufacturer is aiming for a 20% margin and is well ahead of electric vehicles.

Porsche AG will pay a first dividend of 911 million euros plus an additional dividend of 0.01 euros per preferred share in 2022, the prospectus says, in another nod to its popular 911 model. Porsche AG’s capital is divided into 911 million shares for listing. Read more

“Investors are lining up. If the Porsche IPO goes well, one could imagine placing other coins [of Volkswagen] like Audi on the stock market,” said automotive expert Arndt Ellinghorst of data analytics firm QuantCo.

The subscription period for private and institutional investors is expected to run from September 20 to September 28, with shares offered to private investors in Germany, Austria, Switzerland, France, Italy and Spain.

The total proceeds from the sale will be 18.1 to 19.5 billion euros and could help Volkswagen finance its electrification campaign.

($1 = 1.0022 euros)

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Reporting by Victoria Waldersee, additional reporting by Terje Solsvik; Editing by Susan Fenton and Mark Potter

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Eleanor C. William