Porsche IPO approaching the starting line

In spite of rising interest rates, global uncertainty, and a faltering IPO market featuring 46% volume and 58% value decreases respectively year-over-year, Volkswagen AG is discussing the possibility of a late-September to early-October IPO of their iconic sports car manufacturer, Porsche AG.

Underwriters and investors alike are extremely optimistic about the move, as indicated by whispers of a potential $85 billion IPO valuation. For reference, Rivian’s massive $100 billion IPO valuation last year (2021) was able to net underwriters a cool $170 million in underwriting fees, led by Goldman Sachs (GS) and Morgan Stanley (MS) at $43 million each.

As a part of the IPO, the Porsche Family will acquire 25% plus one share of the common stock at a 7.5% premium to the IPO price. 

Breaking the deal down more, the IPO valuation of $85 billion would give Porsche a valuation of $280,000 per car sold in 2021, and while this may seem steep, Ferrari’s $37 billion market cap gives it a valuation of $3.3 million per car sold in 2021.

If looking at the premium the valuation provides, if Porsche were only to sell its least expensive car, the Macan Base ($54,900), or its most expensive car, the 911 Turbo Cabriolet Base ($187,100), that would give it a premium ranging from 1.5x to 5.1x.

For Ferrari, if they were only to sell their least expensive car, the Romo ($218,670), or their most expensive car, the SF90 Stradale ($625,000), that would give them a premium ranging from 4.8x to 13.7x. Important to note that base models only were taken into consideration to preserve ceteris paribus. 

As the comparison shows, even with a steep $85 billion valuation, Porsche still could have some room to rise is that it is regarded as a luxury sports car a tier below that of the Ferrari-McLaren tier. 

This valuation also gives Porsche (almost) equal numerical standing with VW with an $86.86 billion market cap. 

As a whole, the move comes with a ton of intrigue from both sides of the Street, with VW tapping some of the most notorious underwriters such as Goldman Sachs, Citigroup, JP Morgan Chase, and Bank of America, as well as attracting buy-side interest from funds such as T Rowe Price Group and Qatar Investment Authority.