Luxury automaker Porsche's planned initial public offering (IPO) arrives as parent company Volkswagen(OTC: VWAGY) is trying to fund a 73-billion euro ($73.3 billion) transformation into electric and hybrid powertrains as it plans to overtake the current market leader in EV sales, Tesla(NASDAQ: TSLA), by 2026.
VW intends to launch a Porsche IPO by the beginning of October, subject to developments in the capital markets, according to a statement by the company.
VW is selling 25% of the sports car brand. Half of the shares would not be eligible to vote. The remaining shares will be sold to members of the Porsche family, whose company, Porsche Automobil Holding(OTC: POAHY), has 53% of the voting power at VW.
Volkswagen will also sell Porsche Automobil Holding a 25% stake -- plus one common share -- in Porsche, giving the family a blocking voting minority in the automaker and greater control at what was once the family's crown jewel. The share sale is expected to generate anywhere from 60 billion to 85 billion euros.
But there's more than money behind this sale; there's the resolution of a family issue.
Porsche's failed gambit
The Porsche family's history with Volkswagen and Porsche predates both automakers.
It was Ferdinand Porsche who created the first Volkswagen for Adolf Hitler in 1938. Ferdinand Porsche moved on a decade later, establishing the sports car manufacturer that bears his name in 1948 using Volkswagen parts.
In 2005, Porsche SE, then an independent automaker run by Wolfgang Porsche, Ferdinand's grandson, bought 50.8% of Volkswagen AG in aborted takeover attempt. Ferdinand's other grandson Ferdinand Piech, then Volkswagen CEO, turned the tables on his cousin, acquiring Porsche SE, which became Volkswagen's largest shareholder, controlling a majority of its voting rights, but no longer owning Porsche AG.
Nevertheless, Porsche family descendants now control publicly held Volkswagen, which also owns what used to be the family business, and they could soon have a blocking minority at Porsche.
What this means
For the Porsche family, the IPO means regaining some semblance of control over the sports car manufacturer they once wholly owned, while remaining Volkswagen's largest shareholder. Porsche's 25% valuation is worth about as much as its parent company. For Wolfgang Porsche, the move can help heal old wounds inflicted by his cousin, Ferdinand Piech, who died in 2019.
The family's holding company, Porsche Automobil Holding, will profit. Currently worth about $10.5 billion, the firm was paid about $2.9 billion in dividends during the past 10 years.
Currently Volkswagen and Porsche share the same CEO, Oliver Blume, who replaced Herbert Diess as CEO of Volkswagen in July 2022, immediately raising concerns over corporate governance. But given that the Porsche and Piech clans control both Volkswagen and Porsche, there's little real independence at either automaker, despite their public listings.
Volkswagen AG's offering of 911 million Porsche shares on the Frankfurt Stock Exchange appears to be more concerned with shifting ownership and control back to the Porsche family rather than with unlocking value for shareholders. At its heart, it remains a family business as both companies were created by the same family.
For interested shareholders, it's best to stay away, as any shares will be non-voting shares in a company run by the family's whim.
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Larry Printz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Volkswagen AG. The Motley Fool has a disclosure policy.
