Volkswagen and Porsche share history, founding family and capital. The IPO is the latest chapter more typical of Blood Ties, after years of confrontation between two clans of the Porsche family. The operation returns Wolfgang Porsche to the scepter of power within the world’s largest vehicle manufacturer.
More than an IPO. The OPV (Public Offering of Shares) is not only breaking the market schemes, it also hides a power struggle between the clans of the Porsche family to control the fate of Europe’s largest vehicle manufacturer and the iconic brand. Officially, the 9,400 million, which Volkswagen will collect, are destined to invest in the production of electric cars; but the operation is designed so that the Porsche family retakes control of the sports car manufacturer. Until recently, orders flowed from Volkswagen’s headquarters, Wolfsburg, to Porsche’s headquarters, Stuttgart.
Parallel to the issue of the 25% that Volkswagen is putting up for sale, the German manufacturer will place another 25% share package, plus one share, to the Porsche family holding company, Porsche Holding, which is also listed on the stock exchange, granting the right to veto within the Board of Directors of the sports brand. Part of the key to the operation is in the type of action. The securities that go on the market, called preferred shares, are empty of political rights within the company. They do not have the right to vote at the Shareholders’ Meeting. While ordinary shares have financial and voting rights.
The additional action for the Porsches grants them blocking capacity on the company’s Board. This end represents a radical turn in the structure of Volkswagen and Porsche. If Volkswagen ruled Porsche before, now it’s the other way around. Porsche Holding will retain virtually 100% of the voting rights in Volkswagen, but if the IPO succeeds, the Porsche family will once again command the fate of Porsche and Volkswagen.
The small print of the agreement also leaves openwork decisions. After the IPO, VOlkswagen will convene an extraordinary shareholders’ meeting in December in which it will propose to pay 49% of this year’s total income, which will range between 8,900 and 10,200 millionaccording to company forecasts, in the form of an extraordinary dividend, which will mainly benefit the Porsche family.
Both companies have their origins in the Porsche family. The germ of what is now the world’s leading car manufacturer dates back to 1938, in the middle of the Third Reich, when the Austrian engineer Ferdinand Porsche built the first people’s car for Hitler, the famous beetle model. Ten years later, together with his son, Ferry Porsche, he founded the famous sports brand, with his first model 356.
The modern history of Volkswagen, as a motor giant, begins with Ferdinand Piëch, the grandson of Ferdinand Porsche. The Austrian engineer left Porsche to revolutionize German industry with Audi. And in 1993 he became CEO and president of Volkswagen. Under his direction, the popular car manufacturer acquired Lamborghini, Bentley and Audi, after also absorbing Seat and Skoda.
The penultimate chapter of the Porsche saga ended with the iconic brand gobbled up by Volkswagen, in humiliating fashion. Practically, it ended up rescued in 2012, after several attempts to gain absolute control of Volkswagen. In 2009, Porsche began to buy preferred shares of Volkswagen with millionaire loans that almost led to ruin. The different clans of Piëch and Porsche signed peace, to avoid the bankruptcy of the legendary manufacturer.
The Piëch give up control of Porsche in exchange for investments and Wolfgang Porsche, patriarch of the dynasty, closes wounds
The IPO means that Porsche regains control of the crown jewel, without losing control of Volkswagen. In a family key, the Piëch give up control of Porsche in exchange for investments and Wolfgang Porsche, patriarch of the dynasty, closes wounds with the Piëch. The operation has triggered concern among German regulators, due to the intricate structure of Volkswagen.
Currently, Volkswagen and Porsche share the same CEO, Oliver Blume, who replaced Herbert Diess as CEO of Volkswagen in July 2022. For many, he was the missing piece to take Porsche public and close the family circle, despite to not pass any filter of responsible corporate governance.
It’s not a problem for investors, who are flocking to the IPO. During the road shows, Volkswagen has presented the operation as a unique opportunity to invest in the best of the worlds of motoring and luxury. From Wolfsburg, They value Porsche between 70,000 and 75,000 million euros compared to the previous objective of up to 85,000 million, which allows it to have a significant discount compared to its main competitor, Ferrari.
According to Jefferies, the IPO means giving a projection of 10.2 times Ebitda, compared to 23.1 times for Ferrari. Despite this, Porsche’s valuation is very close to Volkswagen, which stands at over 88,000 million. The operation not only offers power to the Porsche, but also potential millionaire profits. Ferrari’s IPO was a resounding success. Since 2015, it has risen by around 265%, shooting up the assets of Piero Ferrari, son of the company’s founder, to 4,100 million.
“Above all, Porsche and Volkswagen are a family business,” recalls Michael Dean, an analyst at Bloomberg Intelligence. “The last litter of Porsche have been formed within the Volkswagen empire, after the defeat of 2012”, explains the expert. Power has returned to Stuttgart, where Porsche’s headquarters are.