Porsche could follow in Ferrari’s footsteps as Volkswagen plots massive $100 billion spin-off

February 22, 2022, 11:42 AM UTC

Porsche could soon follow Ferrari on to the stock exchange with an IPO of its own, tempting investors with the chance to buy shares in a luxury goods company worth tens of billions of dollars—if not more.

For years, parent Volkswagen Group has resisted calls from capital markets to float the wholly owned manufacturer behind the iconic 911 Turbo, its most profitable brand by margin and a major earnings contributor.

On Tuesday, however, VW said it was in advanced talks with its own majority shareholder over a general road map that could potentially take the carmaker, based in Stuttgart, Germany, public. 

“The contents of such a framework agreement and whether one is concluded currently remains open and depends on board approval of both companies, as does the question of whether an IPO of Dr. Ing h.c. F. Porsche AG will continue to be examined,” it told shareholders in a regulatory filing

Investment vehicle Porsche Automobil Holding SE, which controls 53% of VW’s voting shares, confirmed the talks in a separate filing

Stock in both VW and its majority owner immediately reversed earlier losses from broader market malaise to trade more than 9% higher on the news.

Investors have argued the true value of Porsche is not fully priced into Volkswagen shares, and if listed would attract valuations commensurate with Ferrari. Since it is much larger than its Italian pure-play rival, analysts have estimated Porsche could be worth up to €100 billion (about $113 billion) on a stand-alone basis. 

Change in sentiment

Speculation over an IPO gathered steam more than three years ago after the brand’s finance chief, Lutz Meschke, outed himself publicly as openly favoring such a move before he was immediately forced to fall back in line by Volkswagen management. 

“We would likely be viewed as a luxury goods manufacturer, and the multiples are completely different compared with a normal premium brand,” Meschke told reporters back in October 2018. “A valuation of €60 billion to €70 billion certainly doesn’t sound like a stretch.”

In the meantime, sentiment in the industry has changed since Tesla reached a trillion-dollar valuation. Daimler finally caved in to pressure, breaking itself up into two constituent halves, while Geely’s Volvo and Polestar brands have also sought their separate ways on to the stock exchange

More recently Bloomberg reported last week that Ford might be considering spinning off its EV operations, after remarks that suggested CEO Jim Farley was effectively running the two businesses separately already.

While an IPO would better reflect the value of Porsche for Volkswagen, assuming it retains 90% of the shares as the group has with its listed commercial truck unit, Traton, it does mean they forfeit a share of the profits. Perhaps more important, it would highlight just how little the market values the rest of the VW Group. 

Through the first nine months of last year, Porsche posted underlying profit of €3.36 billion and an operating margin of 16%, which puts it alongside Ferrari as among the highest in the automotive industry.

If it is listed, it would technically be the second time for the German sports-car maker. The families that own Porsche Automobil Holding SE agreed to sell their prized possession in 2009 to Volkswagen to stave off bankruptcy after the global financial crisis.

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