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Predicting the Debut Price of the Porsche IPO

Published by: Lucien Paulemil
September 8, 2022 9:00 am

Porsche is set to IPO in the next month or two and as one of the biggest European IPOs in recent history, there has been a lot of speculation about what the debut price will be. With so few IPOs in the post-pandemic era, it’s notoriously difficult to guess where the price is going to end up when it finally comes to it. So, in this article, we’ll examine some thinking and what factors could impact the price of this exciting new listing.

Initial Investor Interest

As with all of these high-profile listings, you can bet that Porsche has already begun conversations with a wide range of high-profile investors to try and test the market appetite. Reports from Bloomberg suggest that the initial estimate from large investors who have been approached will place the ballpark figure at around $85bn.

It’s difficult to judge how much of this value is predicated on the brand’s long-term value as opposed to the future expectations for the company – but regardless, this sort of figure would place the IPO in esteemed company as one of the largest that Europe has ever seen. This is on the back of a challenging macroeconomic picture as well where the energy crisis has been hurting the automobile industry in a significant fashion.

What Could Bring the Value Down?

Let’s look first at some of the key factors that could bring this valuation down when it gets to its initial listing:

  • Macroeconomic Pressure. As mentioned above, Europe is currently going through a dramatic energy crisis resulting from Russian pressure and the prolonged damage of the pandemic lockdowns. As a result, transportation and cars in particular have come under increasing pressure from investors. Porsche is not alone in this, but it could have a direct impact on the IPO price if it is front of mind still when they finally pull the trigger.
  • Lack of Confidence in the Green Agenda. All car manufacturers are making the required shift towards renewable energy, as mandated by regulators and growing social pressure, but Porsche doesn’t have that strong of a track record in this regard. Some analysts still aren’t convinced that they can make this sort of transition effectively, even with a large injection of capital to make it happen. This could be a sticking point for investors and may be something that pulls the value down.
  • Historical Hesitance. Back in 2007, Porsche was so powerful that it was looking to buy Volkswagen and not the other way around – and yet things didn’t work out like that. The company took on significant loans to make that acquisition happen and when it didn’t, they were left to try and clean up the pieces. This is still fresh in investors' minds and so it may play a role in how they think about the price.

Those are some of the headwinds, but now let’s look at the tailwinds in their favor.

What Could Bring the Value Up?

Here are some of the reasons for optimism that the valuation could get up as high as $85bn:

  • Family Control. The proposed listing would put the heirs of Ferdinand Porsche back in the driving seat and that seems to be buoying the spirits of many investors. There’s a bit of nostalgia there, but there’s also a hope that they can bring the soul back into the brand and regain the allure that used to come with owning a car of the Porsche variety. If this happens, we could certainly see a resurgence that justifies this higher ticket price and more.
  • Management Overhaul. The company is in a transitionary period and is on the cusp of a complete overhaul in terms of personnel. With fresh ideas and perspectives coming into the top tiers of the organization, it could spell the start of a new era -something that would bring a lot of potential and promise for would-be investors.
  • Investments Across the Value Chain. Porsche is much more than just a car company and its recent acquisitions have shown that they want to compete across the value chain – with whatever vertical integration it can manage. This makes it a broader investment bet than many would have anticipated and this diversification is incredibly valuable when you consider where the industry is at present.

So, What Is Our Prediction for the Porsche IPO Price?

Taking all of the above into account, it’s clear that the valuation should be in the $50bn-$85bn range. Within that band, it’s very difficult to assess where it might end up exactly because we’ve had so few IPOs of this nature to compare it to in recent months. A lot will depend on the messaging around the listing and what the company chooses to do in terms of splitting the ordinary and preference shares.

Many believe that investors should show caution here and try to see past the brand to the company itself, and we think that is good advice. Porsche as a company is very different to the cultural impact they’ve had as a brand, and any IPO investors will have to keep that in mind as they decide on what they think is a fair price.

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