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Porsche celebrates Europe’s largest IPO in over a decade

Europe celebrated its biggest IPO in more than a decade after shares in luxury sports car maker Porsche began trading on Thursday. 

Parent company Volkswagen Group was able to list its 75% subsidiary despite poor conditions, thanks in part to the chaos in UK currency and bond markets this week. 

VW managed to secure a maximum price for its IPO after investors, including several sovereign wealth funds, listed shares at 82.50 euros, valuing Porsche at around 75 billion euros ($72.5 billion). 
In total, Volkswagen raised 9.3 billion euros in proceeds from the sale of a 25% stake in Porsche’s non-voting shares, making it the biggest IPO since the 2011 listing of Swiss commodities firm Glencore.

“The strong demand shows the confidence of investors in the future of Porsche,” said Arno Antlitz, CFO of Volkswagen  in a statement. 

He added that the revenue will accelerate his company’s transition from gasoline to electric vehicles, which defines its programming code as well as its nuts-and-bolts mechanics. Tesla is currently ahead of VW in terms of software expertise.

The IPO only became possible after Volkswagen executives were able to tap into the vast wealth of this ruling industrial dynasty. At the behest of VW management, the Porsche and Piech clans are taking out large loans to finance an additional 10.1 billion euros in unlisted ordinary shares in the company, enough for a controlling minority. 

Between the two agreements, Volkswagen plans to collect a total of 19.5 billion euros in gross income and 9.95 billion euros in net income after sharing half of the harvest with its shareholders in the form of a one-time bonus.

The twin patriarchs of the VW dynasty, Wolfgang Porsche and his cousin Hans Michel Pich, said that the IPO was a win-win. 

In a joint statement on Friday, “The return will accelerate the transformation of Volkswagen AG. Its shareholders will receive a special dividend payment and Porsche AG will receive more corporate freedom.” Volkswagen hoped to market Porsche as it had marketed Ferrari years earlier—as a luxury consumer product valued above that of a traditional, established automaker like General Motors. 

Although Porsche sold only about 300,000 cars last year, a tiny fraction of the group’s 8.9 million vehicles, it is VW’s undisputed cash cow. The luxury brand’s 5 billion euro revenue accounted for about a quarter of Volkswagen’s annual operating profit. 

Porsche shares rose to 8.70 euros at the start of trading on the Frankfurt stock exchange under the symbol P911. Experts say that the minimum threshold for a successful IPO is if the stock closes above its issue price on the first day, which in the case of Porsche would be above €82.50. 
According to this estimate, Porsche is the fifth largest car manufacturer in the world by market value, ahead of Mercedes-Benz, GM, and Ford.

Source: Fortune

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