BERLIN—Volkswagen shares hovered around breakeven on Monday, reflecting a mixed response from investors to the automaker’s listing plans for sports car brand Porsche AG in what could be Europe’s third biggest initial public offering.
Volkswagen said on Sunday it was aiming for a valuation of 70 billion-75 billion euros ($70–75 billion) for Porsche AG, slightly below some estimates of up to 85 billion euros, but far outstripping the 49-billion-euro price tag for rival BMW and Mercedes-Benz’s 61 billion euros.
Porsche AG aims to win over investors with its track record of success and high margins, even as shares of other luxury carmakers like Ferrari and Aston Martin have suffered this year in the tumult on European stock markets.
But the structure of the listing, in which Volkswagen’s largest shareholder—Porsche SE—will receive a blocking minority of 25 percent plus one of the voting ordinary shares, has sparked criticism from some fund managers.
The IPO will list 25 percent of preferred shares, which do not have voting rights, meaning stock market investors will own just 12.5 percent of Porsche AG’s capital and have little say.
Nonetheless, the listing has attracted cornerstone investors including Qatar Investment Authority, which is buying 4.99 percent of the offering; Abu Dhabi’s ADQ, which is investing 350 million euros; as well as T. Rowe Price and Norway’s sovereign wealth fund, investing 750 million euros each.
“Our starting point is that we always want to be able to vote,” said Carine Smith Ihenacho, chief governance and compliance officer 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 though,” Smith Ihenacho added in a statement to Reuters.
Shares in Volkswagen, which some analysts have said could unlock value for its own stock by listing Porsche AG, were little changed at 14:05 GMT, after rising 3 percent in premarket trade.
Uncertainties around the governance of the two companies—which will both be led by Volkswagen CEO Oliver Blume—could explain the lack of enthusiasm from markets, Ingo Speich, head of sustainability and corporate governance at top-20 Volkswagen investor Deka Investment, said.
“If the splitting off of two companies improves the management quality and strategic direction of a business, that will be reflected in the valuation,” Speich said. “It is fundamentally right that Porsche AG becomes more independent - but this is not an independent set-up.”
Volkswagen’s valuation for Porsche AG is close to its own market capitalisation of 88 billion euros.
Shares in Porsche SE, which is controlled by Germany’s Porsche and Piech families, were up 2.6 percent in afternoon trade.
While the IPO could still be pulled before trading starts on Sept. 29, Porsche AG’s Chief Financial Officer Lutz Meschke said in early September this would only happen in the event of new “severe geopolitical problems”.
Volkswagen said on Sunday it would price Porsche AG’s preferred shares at 76.50–82.50 euros per share.
A prospectus with further details of the listing is expected to be published on Monday afternoon.
“Investors are queuing up. If the Porsche IPO goes well, one could imagine placing other parts [of Volkswagen] such as Audi on the stock exchange,” auto expert Arndt Ellinghorst of data analytics firm QuantCo said.
Analysts have compared Porsche AG stock to Ferrari, which has a market capitalization of 38 billion euros but an operating margin of 24 percent to Porsche’s 17–18 percent. The German carmaker is targeting a 20 percent margin and is far ahead in electric vehicles.
The subscription period for private and institutional investors is expected to run from Sept. 20 to Sept. 28, with shares offered to private investors in Germany, Austria, Switzerland, France, Italy, and Spain.
Total proceeds from the sale will be 18.1–19.5 billion euros and could help Volkswagen fund its electrification drive.
($1 = 1.0022 euros)
