Volkswagen SA VWAGY on September 5 announced that it would launch its famous sports car manufacturer, Porsche Automobil Holding SE POAHY, in what could be one of the largest initial public offerings (IPO) in Europe.
The IPO marks a new stage in the sometimes strained relationship between the two automotive leaders. Volkswagen intends to schedule the IPO in late September or early October this year, subject to capital market conditions.
In preparation for the listing, Porsche’s shares were split into 50% common stock and 50% non-voting preferred stock, Volkswagen noted. Porsche will probably be listed on the Frankfurt Stock Exchange. Porsche is offering 25% preferred stock to private investors via the IPO. Porsche is expected to be worth between 60 and 85 billion euros ($60 and 85 billion).
The Porsche family heirs, who own a majority stake in VWAGY, will buy 25% plus one share of Porsche AG, or voting shares, through their listed family investment fund, Porsche SE. In 2009, Volkswagen bought 49.9% of Porsche SE’s sports car business, Porsche AG, and in 2012 it brought in the remaining share. From now on, Porsche can again exert its control over the major decisions of the company.
Porsche’s status and reputation as a luxury brand has allowed it to raise prices, making it a source of revenue for the Volkswagen Group. Porsche’s operating profit jumped 22% in the first half of this year while Volkswagen recorded an 8% drop. The IPO would therefore be an important step for Volkswagen to raise funds to fuel its ambitious electric vehicle plans.
Volkswagen will continue to hold the rest of Porsche’s stock. If the IPO is successful, 49% of its proceeds will be distributed to its shareholders in the form of a special dividend, likely to be paid in early 2023. The company also plans to offer the preferred shares of Porsche to retail investors. in countries including Germany, Austria, Switzerland, France, Spain and Italy.
If successful, Porsche’s market debut could open its entry to a number of ETFs in the coming days.
Focus on ETFs
Renaissance International IPO ETF IPOS
The underlying Renaissance International IPO Index is an equity index based on a portfolio of newly public companies not listed in the United States, prior to their inclusion in core global equity portfolios. The fund currently holds 55 assets in its basket, each representing less than 8.58% exposure. The fund amassed $175.8 million in its asset base while trading a low volume of around 30,000 shares, which likely involves additional costs beyond the 0.80% expense ratio.
First Trust US Equity Opportunities ETF FPX
This ETF focuses on the largest, best performing and most liquid US IPOs and tracks the IPOX-100 US Index. New companies can enter the fund’s holdings after trading for at least 100 days. In total, the fund holds 100 stocks in its basket, with the largest allocation going to the top company with a 5.85% share. The product is biased towards information technology at 21.5%, while healthcare rounds out the next spot with double-digit exposure. The fund has accumulated $1.1 billion in assets under management and trades a volume of approximately 94,000 shares per day. It charges 57 basis points of fees per year.
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Renaissance International IPO ETF (IPOS): ETF Research Reports
First Trust US Equity Opportunities ETF (FPX): ETF Research Reports
Volkswagen AG Unsponsored ADR (VWAGY): Free Stock Analysis Report
Porsche Automobil Holding SE Unsponsored ADR (POAHY): Free Stock Analysis Report
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