Porsche went public at the end of September. A month later, it now has a market capitalization of $87 billion, ranking fourth in the global carmakers (after Tesla, Toyota, and BYD) and eclipsing its parent company, Volkswagen AG. In addition to being an annual grand event worldwide, Porsche IPO means something else to Volkswagen AG, investors and the automotive industry once the impressive valuation is put aside for a minute…
- Not all Porsche shares were issued. Porsche stock has been divided into ordinary shares and preference shares. The shares issued were the preference shares, which do not have voting rights, and only 12.5% of them were issued. Even so, the IPO raised more than 10 billion euros for Volkswagen AG.
- Porsche Automobil Holding SE, which holds 31.4% of Volkswagen AG's shares and 53.3% of the voting rights, has directly increased its control over the operations of the Porsche brand. Porsche SE bought 12.5% of the ordinary shares, i.e., 25% of the voting rights. According to German corporate law (Gesellschaftsrecht), Porsche SE is allowed to exercise veto rights in important matters. It means that the Porsche and Piëch family, which controls Porsche SE, has regained control of the family business. So, to sum up the above, Porsche publicly issued 12.5% of the preference shares and sold 12.5% of the ordinary shares to Porsche SE, whereas Volkswagen AG keeps the remaining 75%.
- Publicly traded shares have no voting rights and are not attractive to corporations. Porsche reported a record-high annual sales volume of over 300,000 units last year. Although the sales volume only accounted for 3% of Volkswagen AG's total, the profits accounted for over 25% of the total, making Porsche the "cash cow" of the Group. Such performance is very attractive to the investing general public, but the non-voting nature of the preference shares has excluded outside forces (e.g., ambitious Chinese car companies and non-automotive consortia) from the brand's decision-making circle. This is not the same situation as a few years ago when China's Zhejiang Geely Holding Group acquired a 9.7% voting stake in Daimler (the parent company of Mercedes-Benz).
- Once the car company ranking first in market capitalization across the globe, VW has seen its share price falling from the highs in the past year and a half, and now the launch of its new EV platform is delayed because the R&D has not been going well at software company CARIAD. VW is undergoing the biggest business crisis since the Dieselgate scandal in 2015. Despite ranking second in the world in total sales last year, Volkswagen AG can't afford to be optimistic about its prospects in the EV era. The IPO of the Group's most valuable brand will not only revive the morale within the Group but also raise the capital needed for continued investment in developing new technology. If we consider this in the context of the Group's decision in July to replace the CEO with the CEO of Porsche, who is still simultaneously the CEO of Porsche, we clearly see that the Porsche and Piëch family are not only influential in board of directors voting power, but they are also beginning to take control of Volkswagen AG's future business strategy. The Porsche and Piëch family's emerging power will have a decisive impact on Volkswagen AG's strategic planning and development for new products in the next three years and future sales results, as well as sway the global car market.
Porsche announced last year that it would achieve carbon neutrality by 2030 (with EVs accounting for more than 80%), and its parent company Volkswagen AG has established a comprehensive strategic timetable, but the development of a new EV platform is falling behind schedule. The IPO of Porsche will be a critical move for the whole group. I'm positive it's a win for the Porsche and Piëch family, but time will tell whether it's a win for Volkswagen AG.