Weekly Brief: Porsche IPO Proves its Premium Allure

Commentary By Andrew Tolve

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3rd October 2022

General consensus suggests that it’s a terrible time for an IPO, what with a worldwide energy crisis, war in Ukraine, record inflation and soaring interest rates. Yet, Porsche went public last week anyway.

Parent company Volkswagen listed Porsche at an audacious €75Bn ($73Bn), marking the third largest European IPO ever and the largest in more than a decade. The move makes Porsche the fifth most valuable automaker in the world by market cap overnight, trailing only Tesla ($825Bn), Toyota ($178Bn), BYD ($92Bn) and VW ($74Bn). VW pocketed €9.4Bn from the deal and says that it plans to use the money to invest in software and expedite its transition to electric vehicles.

The IPO marks the end of a dramatic fourteen years that’s featured more twists and turns than a crime novel. It started back in 2008 when Porsche attempted to make a hostile takeover of the much larger VW. Porsche had to pile on debt to raise enough money for the purchase, money that it planned to pay off with gold from the VW war chest once the takeover was complete. Instead, VW turned around and made a hostile takeover of Porsche instead. An awkward dynamic has existed ever since, with the Porsche family harboring desires for independence while publicly maintaining its contentment with life under the VW umbrella. The two began floating the idea of an IPO in earnest at the start of this year. Porsche got waylaid in software delays, however, which cost then VW CEO Herbert Deiss his job. Porsche CEO Oliver Blume took over for Deiss in July, kept his role at Porsche, and finally managed to push the IPO over the finish line.

To put the Porsche IPO in perspective, consider that 322 companies went public last year at the height of the market. This year that number has shrunk to 83 and they have raised just $7.27Bn amongst them. Markets are down on average 20%. The fact that Porsche was able to go public against this backdrop at such a high value speaks to the allure of the brand and the strong financials that the carmaker has delivered year over year. Most Porsches cost more than $100,000; its clientele, therefore, isn’t likely to be affected by the challenges of a potential recession. Additionally, investors are attracted to the fact that Porsche is working on an all-electric Boxster and Cayman – vehicles that could help challenge Tesla for the luxury EV market.

In other news, Chinese carmaker Geely purchased a 7.6% stake in British luxury carmaker Aston Martin. The investment came as part of a $730M funding round that included the Saudi government as an investor. Geely is as famous for the other carmakers that it owns, partially or outright, as it is as a standalone brand. It owns British sports car company Lotus and most of Volvo Cars and EV start-up Polestar. It also owns 9.7% of Daimler. Rumor has it that Geely was seeking total ownership of Aston Martin but the British carmaker wasn’t interested in a full sale.

What’s the Chinese carmaker up to? Beyond collecting signature brands, it’s also leveraging its ownership rights to forge valuable partnerships with each of the brands in the European market and, in turn, in China. “We look forward to exploring potential opportunities to engage and collaborate with Aston Martin,” said Geely CEO Daniel Donghui Li.