Last week Volkswagen AG announced that it will be conducting a feasibility assessment on offering Dr. Ing. h.c. F. Porsche AG on an initial basis for purchase to the public. The management board and supervisory board of Volkswagen believe that a Porsche IPO could be key to the growth of the company into a leader in electric mobility. Why does VW need a sports car company in its portfolio if it wants to build electric shuttles?
The company says it hasn’t made a final decision yet, but they’re certainly dancing around the idea a lot for there not to be at least a leaning one way or the other.
„The automotive industry is changing fundamentally. Volkswagen is determined to play a leading role in a world of zero-emission and autonomous mobility. We have set the right course with our NEW AUTO strategy and thanks to our substantial cash flows will invest with clear focus to enter new profit pools such as battery & charging, autonomous driving and our own mobility platform in the next few years. An IPO of Porsche AG would give us additional flexibility to further accelerate the transformation. Porsche AG would gain more entrepreneurial freedom and at the same time continue to benefit from group synergies,” said Herbert Diess, CEO of Volkswagen AG.
In the event of the IPO of Porsche AG, Volkswagen would still own a majority stake in Porsche. Here’s how that would break down according to Volkswagen’s recent release:
Porsche AG is envisaged to be divided into 50% preference shares and 50% ordinary shares and up to 25% of the preference shares are to be placed on the market as part of a possible initial public offering. Porsche Automobil Holding SE would acquire 25% plus one share of the ordinary shares in Porsche AG from Volkswagen AG at the placement price of the preference shares plus a premium of 7.5%.
Stephan Weil, Minister President of the State of Lower Saxony, which is also a major shareholder in Volkswagen, said: “The planned IPO of Porsche offers considerable opportunities for the further development of the VW Group as a whole and, above all, its Lower Saxony sites. That is why the state agrees with the presented framework agreement and will accompany the further process constructively.”
Volkswagen has already made the decision to invest something like 20 billion euros in vehicle plants in Lower Saxony over the next five years. This will primarily be the site of VW’s new “Project Trinity” which is said to be a state of the art electric car with full autonomous technology. I don’t know much about the state of autonomous driving, but that sounds seriously expensive and time intensive. Perhaps the sale of Porsche shares could fund something like Trinity.
Obviously we are not in the business of offering investment advice, and you should take this with more than a few grains of salt, but when was the last time betting on Porsche was a losing scenario?