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Porsche’s recent initial public offering (IPO), valued at around $72 billion, is one of the largest in European history. This IPO raised about $9 billion for Volkswagen which owns Porsche. The company offered 25% of Porsche’s preferred stock to investors, putting up about 12.5% of the entire company. This IPO is happening during a time that is seeing the market for IPOs drying up due to the volatility of the market.
An IPO happens when a private company goes public by offering shares of the company to public investors, which is often done to raise capital for the company. However, in the past several years the number of successful IPOs has significantly decreased. This can be attributed to several things such as the slide in stocks, high inflation, high energy costs, and fear of a recession. This has led to only about $80.5 billion raised this year from IPOs compared to $700 billion raised last year. Porsche’s valuation makes it the second-largest in German history and one of the largest in European history.
This is the first time the public will have access to Porsche since Volkswagen acquired them in 2012 after Porsche failed to acquire Volkswagen. Volkswagen is offering 911 million shares for its iconic 911 model car. A valuation of $72 Billion is very close to Volkswagen’s valuation of $88 billion, which is a unique situation. The $72 billion valuation shows how profitable the Porsche section of Volkswagen is as Porsche is only one of the many brands that Volkswagen owns. However, Volkswagen will continue to own a controlling section of Porsche. Even though Volkswagen has struggled throughout this year, Porsche is still extremely profitable and is on target for $39 billion in sales. Volkswagen hopes to have the same level of success in offering the Porsche IPO as Ferrari did. Ferrari had unprecedented levels of hype leading up to its IPO, and after initially trading lower by opening at $50 per share, their stock is now doing extremely well as Ferrari trades at around $200.
There are many reasons why people are excited about Porsche going public. Their return on sales is 18%, which is two percent higher than last year, even with all of the supply chain issues that countries around the world are facing. It is also believed that there is a possibility for higher profit margins, as electric vehicles (EVs) become cheaper to make in the future. Porsche already enjoys extremely high margins as they make over three times more on every car when compared to BMW or Mercedes-Benz. The company is continuing to focus on higher-end cars that have the most profit potential, meaning Volkswagen will also benefit from this cash influx. They are planning to invest most of their new cash flows into their EVs and software development. Software development is an important part of the company that has been overlooked in the past few years, and they hope the new funding dedicated to software development will help lead the company into the EV future.
Overall, this is a promising step for Porsche and the future of EVs. Given the recent IPO environment, we are hoping for a successful IPO to give the market more confidence in supporting them again.
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