Despite a bleak market for Initial Public Offerings (IPO), Volkswagen Group is going ahead with a planned IPO, expected to unlock as much as $85 billion and become one of Europe’s largest public offerings.

“This is a historic moment for Porsche,” Porsche and Volkswagen Group CEO Oliver Blume said.

According to a statement released by VW Monday following a meeting of its supervisory board, the manufacturer plans to launch the initial public offering by the start of October, contingent on future events in the capital markets.

While this gives the board an out, it comes at a time of high interest rates, spiraling inflation, a European land war, energy scarcity and supply chain shortages. Nonetheless, the largest automaker in Europe hopes to complete the listing before the end of the year. 

The funds raised will help cover the massive cost of electrification and software development. After being forced to sell the sports car manufacturer to Volkswagen some 13 years ago, the share sale will provide the Porsche and Piech families with more influence at their former company. Diminutive Porsche attempted to take over the far larger Volkswagen Group, but the onset of the financial crisis faltered when financing couldn’t be secured. Volkswagen ended up swallowing Porsche instead.

The new deal

Volkswagen Group is selling 25% of Porsche. Half would have no voting rights, the other half will, and will be sold to the Porsche family members, whose Porsche Automobil Holding SE now owns 53% of the voting power in Volkswagen. VW will distribute a special dividend to Porsche Automobil Holding SE to finance a 25% blocking holding plus one share in the publicly traded Porsche. The shares would provide the Porsche heirs a blocking minority, giving them control over major decisions. 

Volkswagen Group would retain the remaining 75% of shares.

The automaker said VW shareholders would receive a special dividend worth 49% of the money raised through the IPO, which would probably be paid around the start of 2023.

Others eye Porsche’s IPO

VW also plans to offer Porsche preferred shares to retail investors in Germany, Austria, Switzerland, France, Spain and Italy, the company said Monday. Big investors have already expressed interest, including Qatar Investment Authority, which plans to buy a 4.99% stake, and T Rowe Price. Billionaires are expressing interest as well, including Dietrich Mateschitz, founder of Red Bull energy drinks, and LVMH Chairman Bernard Arnault, according to online reports.

But other investors are staying away due to the IPO’s structure, which prevents private investors from having any voting rights, could hinder its stock price. There are also corporate governance concerns, as CEO Blume holds the title at both Porsche and Volkswagen, which seems to contrary to the Group’s alleged reason for doing a Porsche IPO: greater independence, something that seems doubtful if the same person is running both companies.

Porsche sold 301,915 vehicles in 2021, up 11% from 2020. That’s less than 3% of VW’s total passenger car sales, but the company accounts for 50% of VW’s pretax profit from passenger cars. The brand’s most popular vehicles were the Macan, Cayenne and Taycan. 

An electric future

Porsche is planning to have one-third of its line-up electrified by 2025, and two-thirds electrified by 2030.

Porsche intends to create an all-electric version of the Boxster and Cayman based on the Mission R concept car, which is similar in size to the 718 Cayman but lower and wider. In “racing mode,” it generates 671 horsepower, in “qualifying mode,” 1,073 horsepower, a top speed of more than 186 mph, and a 0-60 mph time of less than 2.5 seconds to reach 60 mph. Recharging to 80% takes 15 minutes.

How much of that will make it to an electric 718 in unknown. But the forthcoming EV sports cars will be built at Porsche’s main Zuffenhausen plant in Stuttgart, with production beginning in 2023 alongside the 911, which will be the last Porsche model to be electrified. The electric 718 uses the PPE platform that will be used for an all-electric Macan as well. It’s expected to leave the Leipzig at about the same time as the electric 718.

In the first half of 2022, the Taycan was Porsche’s fourth most-popular vehicle, behind the Macan, Cayenne and 911. 

A common past

Volkswagen’s start as a company was partially due to Ferdinand Porsche, who engineered the Volkswagen Type 1, which would become the Volkswagen Beetle. And when Porsche established his own sports car business, early models were reliant on the Volkswagen parts he had created. 

While both companies share a common parent, they also have a history of collaboration. It began in 1969, with the VW-Porsche 914 and 914-6, the former sporting a Volkswagen engine and the latter sporting a Porsche powerplant.

Seven years later, the automakers teamed up to produce the Porsche 912E and the Porsche 924. And today, the Porsche Cayenne parts is built at Volkswagen’s Bratislava, Slovakia factory.