It’s time to park Volkswagen’s big initial public offering. The 82 billion euro Wolfsburg group’s plans to list luxury marque Porsche have been tarnished by its decision to name the same boss for both companies. While VW results on Thursday showed no sign of a change of heart, bosses should be seriously considering one.
The logo of Porsche is pictured on the steering wheel of a Porsche 911 sports car in Seoul, South Korea, June 16, 2020. REUTERS/Kim Hong-Jibig initial public offering. The 82 billion euro Wolfsburg group’s plans to list luxury marque Porsche have been tarnished by its decision to name the same boss for both companies. While VW results on Thursday showed no sign of a change of heart, bosses should be seriously considering one.
VW’s Porsche IPO should be a corporate finance victory lap. By spinning off the brand, the German carmaker could be worth 90 billion euros, giving its parent a chunky cash windfall. Porsche could thrive outside of Volkswagen’s messy governance, which encompasses union and workers board representatives, plus local politicians and the Porsche and Piech families as shareholders.
The process has started in the wrong gear, however. Volkswagen’s board in February came up with a plan to list a quarter of the company’s non-voting shares later this year, and sell just over that in voting shares to the holding company of the Porsche and Piech families, which control over half VW’s group’s voting rights. But that meant Porsche would still be indirectly controlled by VW, only now with the families holding a blocking stake., Porsche boss Oliver Blume will also run VW.
Meanwhile, global recession threats and high gas prices make it a bad time to risk having a distracted CEO. Carmakers will face higher energy costs, and a weaker consumer will hurt prices. VW’s electric vehicles need to regain market share in China. VW’s non-voting preference shares are trading at around 4 times 2023 earnings, according to Refinitiv forecasts and Breakingviews calculations, a discount to their 6 times level at the start of the year.
Delaying the IPO would allow VW to line up a clearer succession plan for Porsche, avoiding the need to share a CEO. It could also buy time until the economic outlook has improved. It might even come up with a less convoluted IPO structure.
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