Volkswagen shares dipped on Monday as investors gave a muted reaction to news the carmaker is targeting a valuation of up to €75bn for Porsche in a share sale of the sports car manufacturer.
Porsche 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.
Volkswagen, which some analysts have said could unlock value for its own stock by listing the luxury brand, saw its shares fall slightly in the session.
Uncertainties around governance of the two companies and the strong grip of Volkswagen’s top investors on strategy at both 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,” Mr. Speich said. “It is fundamentally right that Porsche AG becomes more independent – but this is not an independent set-up.”
The valuation for Porsche of €70bn to €75bn is slightly below some investors’ estimates of up to €85bn, but still far outstrips the valuation of other German carmakers like BMW’s €49bn, or the €61bn for Mercedes-Benz.
It also comes close to Volkswagen’s own market capitalization of €88bn.
Shares in Porsche, Volkswagen’s largest shareholder which will take a big stake in Porsche, rose by almost 2.5%.
While the initial shares offering could still be pulled before trading starts on September 29, Porsche chief financial officer Lutz Meschke had said earlier this month this would only happen in the event of new “severe geopolitical problems”.
Volkswagen plans to sell up to 12.5% of Porsche’s share capital to investors in the form of preferred shares, which do not carry voting rights.
Already, cornerstone investors have laid claim to almost 40% of the offer: Qatar Investment Authority, Volkswagen’s third-largest shareholder, has committed to buying 4.99%, while Norway’s sovereign wealth fund and T Rowe Price will each purchase shares worth €750m.
Abu Dhabi’s ADQ will buy shares worth €300m.
“The Porsche IPO will most likely be a success … 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.