Shares of Volkswagen fell on Monday as investors reacted muted to news that the automaker is targeting a valuation of up to 75 billion euros for Porsche in a sale of shares in the automaker from sport.
Porsche aims to woo investors with its success and high margins, even as shares of other luxury car makers like Ferrari and Aston Martin have suffered this year from the turmoil in European stock markets.
Volkswagen, which some analysts said could unlock value for its own shares by listing the luxury brand, saw its shares fall slightly during the session.
Uncertainties around the governance of the two companies and the strong grip of Volkswagen’s major investors on the strategy of the two could explain the markets’ lack of enthusiasm, said Ingo Speich, head of sustainability and corporate governance at Deka Investment, the top 20 Volkswagen investors.
“If the split of two companies improves the quality of management and the strategic focus of a business, that will be reflected in the valuation,” Mr. Speich said. “It is fundamentally right that Porsche AG should become more independent – but it is not an independent organization.”
Porsche’s valuation of €70-75 billion is slightly lower than some investors’ estimates of up to €85 billion, but still far exceeds the valuation of other German automakers at €49 billion. from BMW or the 61 billion euros from Mercedes-Benz.
It is also approaching Volkswagen’s market capitalization of 88 billion euros.
Shares of Porsche, Volkswagen’s largest shareholder that will take a large stake in Porsche, rose nearly 2.5%.
While the initial share offering could still be withdrawn before trading begins on September 29, Porsche chief financial officer Lutz Meschke said earlier this month that would only happen if new “serious geopolitical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, flagship investors have claimed almost 40% of the offer: Qatar Investment Authority, Volkswagen’s third largest shareholder, has pledged to buy 4.99%, while the Norwegian sovereign wealth fund and T Rowe Price will each buy shares for 750 million euros.
ADQ Abu Dhabi will buy shares worth 300 million euros.
“The Porsche IPO will most likely be a success…investors are lining up. If the Porsche IPO goes well, one could imagine placing other coins [of Volkswagen] like Audi on the stock market,” said automotive expert Arndt Ellinghorst of data analytics firm QuantCo.