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Heard on the Street Blog

Porsche Has Been A Jewel In The Volkswagen Group Portfolio

This week Volkswagen confirmed its intention to float shares in Porsche in the coming weeks — an IPO that, if it comes off, would be one of the largest in recent European history.

Porsche in proportion

‍Analysts are valuing the company at anywhere between $60bn and $85bn ahead of the proposed listing, though it's difficult to overstate how precious a jewel in VW’s crown the sports car maker is.

Within the vast Volkswagen Group portfolio, Porsche and Audi are the two biggest profit engines by some distance. However, when compared to VW's passenger car division — which sold 2.7 million vehicles last year — Porsche's production is small. The iconic brand sold just ~300k cars but, thanks to an average selling price of around $100k and a lean cost base, Porsche produced roughly 2x the operating income of the mainstream VW brand.

‍Keeping it in the family

‍Although just 12.5% of the total shares will be sold to IPO investors, the listing should give VW Group more financial firepower to complete the costly transition to electric vehicles.

The Porsche-Piech family, made up of direct descendants of the founder, will end up owning some 25% of voting shares in the company. They'll be hoping that Porsche shares will race higher as a result of the public listing, just like Ferrari's did in 2015 when the Italian company was spun out from its parent company, Fiat Chrysler.