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Porsche & Volkswagen: what to expect after the Porsche listing?

Vontobel Markets
28 Sep 2022 | 2 min read

Anticipation rises for Porsche's IPO

On 29 September, Porsche will be listed on the Frankfurt Stock Exchange. According to Volkswagen, the company's shares will be priced between EUR 76.5 and 82.5. Based on this value, the automotive group would be valued at between 70 and 75 billion euros. For Volkswagen, the spin-off of the luxury vehicle manufacturer (in which it will continue to hold a 25 per cent stake) could be used to accelerate and support the transition to electric and self-driving cars: between EUR 8.7 billion and EUR 9.4 billion would enter the company's coffers. The Porsche-Piëch family will buy an additional 12.5 per cent of the voting shares, paying a premium of 7.5 per cent, while EUR 3.8 billion should come from financial groups such as Qatar Investment Authority, Norges Bank, T Rowe Price and the Abu Dhabi sovereign wealth fund, ADQ. As the Wall Street Journal recalls, Porsche has played an important role for Volkswagen, accounting for 3 per cent of passenger vehicle sales but 50 per cent of the gross profits of the business.

If the deal is successful, 49% of the proceeds and the proceeds of the private placement will be distributed to VW shareholders in the form of a dividend, which will be paid in early 2023. Several analysts believe that Porsche's IPO may be similar in some respects to that of Ferrari, which showed how automotive companies can often be compared to luxury companies. Mention should be made of the McKinsey study where it is pointed out that the market for cars ranging from over $80,000 to over $500,000 could see a Compounding annual growth Rate (CAGR) 2021-2031 ranging from 1% to 14%, depending on the price range. Meanwhile, ahead of the IPO, Volkswagen reported that global car shipments grew 12.7 per cent year-on-year in August. Since the beginning of the year, Volkswagen shares are leaving 17.73% on the ground. However, of the 24 analysts surveyed by Bloomberg who follow the stock, 20 provide a 'buy' rating, three a 'hold' and only one a 'sell'. The average 12-month target price is EUR 219.22, with a potential return from current prices of 50.5%. TIKR forecasts estimate that revenues could continue to grow in the coming years, reaching EUR 275.61 billion in 2022 and EUR 346.11 billion in 2026. Normalized net profits are expected at EUR 17.09 billion in 2022 and EUR 16.57 billion in 2026.

Volkswagen AG One year price graph

Source: Bloomberg. Note: past returns are not a reliable indicator of future returns

Volkswagen Five year price graph

Source: Bloomberg. Note: past returns are not a reliable indicator of future returns

From a graphical point of view, Volkswagen shares have been in a downward trend since the second half of March 2021. In the short term, it appears that the prices may continue the downward trend, as the trend line obtained by linking the lows of 6 July to those of 22 August 2022 has been broken. The current downtrend could therefore have as its main target the support at EUR 140. On the contrary, a positive signal would be given with a restart above EUR 160, where the violation of the horizontal level expressed by the lows of 30 November 2021 and the trendline drawn with the tops of 18 March and 6 April 2022 would take place. If this were to occur, a restart of the bullish front towards EUR 190 could be observed.

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