Will Porsche's IPO be downgraded if consumption is downgraded?

The cold winter like market conditions have made the listing generally stagnant, but VW does not intend to put the brakes on Porsche.

Entering September, if everything goes according to plan, an IPO with the highest valuation of US $85 billion in automobile history will be reached soon, and Europe will also usher in the largest initial public offering in history. If successful, Porsche's brand valuation may even exceed the current market value of its parent company Volkswagen.

Since last year, Volkswagen Group has always wanted to optimize some of its brands, including the promotion of Porsche's separate listing and the separation of Lamborghini, Bugatti and other ultra luxury brands. In February this year, Volkswagen Group and Porsche formally drafted and reached a preliminary agreement on the independent listing of Porsche, hoping to release the value of this luxury car brand.

In fact, from the beginning of this year, runaway inflation, rising interest rates and the most serious energy crisis in Europe in decades have all caused the IPO market to slow down significantly, and the entire IPO market is like an ice cave. In this period, investors begin to become cautious and take a more wait-and-see attitude.

Volkswagen launched an internal review in February to prepare for the potential launch of Porsche. Since the Russian Ukrainian war, although the European economy has been affected by the soaring energy prices, VW executives reduced their holdings and reiterated their commitment to IPO.

Internal palace Dou

Will it be listed successfully? As far as the board of directors of Volkswagen and Porsche held a meeting to discuss the listing plan on Monday, it seems that the IPO is imminent and imperative.

In the past, the value of Ferrari doubled five times after it was listed. It is hard for the public not to be excited. When Fiat (now a subsidiary of stellantis) spun off its most iconic brand Ferrari in 2015, of course, the Agnelli family, the majority shareholder of Fiat, welcomed the best opportunity. At that time, the global market was in a period of general upward trend, low inflation and low interest rates.

Since the IPO in 2015, Ferrari's stock has made its debut at a price of 43 euros, but today it has reached 195 euros.

"The Agnelli family has clearly shown how to release value from their Automotive Group. Volkswagen is now following in these footsteps and will bring a legendary sports car brand to the stock exchange," said Patrick kronemam, an investment consultant.

Compared with Ferrari, which sells 10000 taels a year, Porsche, which focuses on both sales and profits, may be more comfortable in the capital market.

Although VW said on the face of it that it wanted to release the potential of this iconic sports car manufacturer, it actually wanted to make profits from the public offering. At the same time, by retaining 12.5% of the preferred shares with voting rights of shareholders, VW will continue to fully control Porsche.

Some analysts said that Volkswagen's decision to issue only non voting shares angered some investors and may make it more difficult to obtain the highest price of the shares. The abacus of the masses can be heard in China.

But the Porsche Piech family will never lose after fighting for so many years. Porsche's listing method is to reserve voting shares for insiders and non voting shares for other investors, "mainly to ensure that the family becomes the main shareholder of Porsche," some analysts believe. "This family wants to hold the reins in their own hands."

At the same time, there are differences in the allocation of funds between the two companies. Volkswagen hopes to raise as much capital as possible through this IPO to support Volkswagen's electric vehicle transformation plan. However, the Piech family hopes to participate more directly in the management of Porsche AG and have more say. Therefore, they do not want the share issue price to be too high.

In fact, the Volkswagen Group and the Porsche Piech family have been fighting in secret. In fact, the resignation of Herbert diese, the new CEO of the management in July, is just a victim of the two struggles. The board appointed Porsche CEO Oliver Blume to replace him as head of Volkswagen, but allowed Mr. Blume to continue as Porsche CEO, which angered some investors. They believe that there may be conflicts of interest between the two roles, especially in the sensitive period before the IPO.

At the end of July, an investor opinion poll conducted by Bernstein research showed that 71% of the respondents believed that Mr. Bloom's dual role would have a negative impact on Porsche's IPO.

Arno antlitz, VW's chief financial officer, said in July that the company was still committed to IPO, which he said would give Porsche more corporate independence, while VW "would gain more flexibility in financing transformation".

Therefore, it is still unknown who will prevail internally after the IPO of Porsche, but the external situation can not be ignored.

External danger signal

Porsche was brought to the stock exchange because of its objective sales volume and profit margin. Since 2018, many car companies have begun to tighten their belts, but luxury cars have not been affected, but their market share has increased instead of decreasing. As a luxury brand with high prices, Porsche's sales have increased rather than decreased in the three years affected by the epidemic and the turbulence of the car market.

China's automobile consumption has changed from "every 20 new cars sold, one of which is a luxury brand" in 2015 to "every 6.7 new cars sold, one of which is a luxury brand" in 2021

The data show that in 2021, the delivery volume of Porsche in all the markets for sale increased, and nearly one-third of them were sold to China.

However, this year seems to be the end of the good days for luxury brands. From various data and reports, not only Porsche, but also the whole luxury car market has lost its fragrance. As the largest single market of Porsche for seven consecutive years, once the wind direction of the Chinese market changes, Porsche should have smelled danger.

From January to July this year, Porsche sold a total of 53000 new cars, a year-on-year decrease of 3%. The average transaction price of Porsche brand in July was 887000 yuan, 8600 yuan less than that in June.

In July, there was great pressure on the sales of millions of Yuan class big cars such as Porsche Cayenne and palamera. In the same period last year, dealers could even increase their prices. However, even if there was a certain discount in retail this year, the declining sales volume was not stopped.

Not only that, the value preservation rate of luxury cars is also falling. Once the value preservation rate falls, it will further affect people's confidence in buying, forming a vicious circle. According to the Research Report on China's automobile hedging rate in July 2022, Porsche's hedging rate dropped from 100.1% to nearly 10%, to 90.9%, Mercedes Benz from 79.5% to 73%, and BMW from 74% to 69.1%.

At the same time, it is not difficult to see from the report that in the first half of 2022, the global automobile industry experienced the chain reaction of the Russian Ukrainian war and the supply chain problems associated with the epidemic, resulting in repeated price increases and delivery difficulties for electric vehicles. Although the market still seems to show that the price of new luxury cars is strong and the supply exceeds the demand, the situation in the second-hand car market is the opposite.

In essence, the price of a new car is directly linked to the residual value of a second-hand car. The more valuable a new car is, the more valuable a second-hand car is. However, the actual situation is that although the price of a new car is not reduced, the second-hand car is beginning to become worthless. The market is honest and truthfully reflects the consumer's tendency.

The core reason for the current situation is that consumption is degrading. With the economic fluctuations, most people's consumption desire has decreased, and they also pay more attention to practicality rather than incidental value attributes. We should know that luxury brands in the eyes of most people are first expensive, then good.

After the removal of the restrictions on the entry of used cars in China, the overall price began to become more transparent, and the previous performance of the residual value of used cars began to decline further. Therefore, the follow-up value preservation of luxury brands may decline further.

Although the European stock market has suffered a cold winter this year, this has not stopped investors' enthusiasm for Porsche's IPO. Neither the "Gong Dou" of the internal group nor the dangerous atmosphere of the external market has delayed Porsche's IPO plan. The proceeds from the IPO at the end of September and the beginning of October are obvious for Volkswagen to catch up with Tesla and promote the group's electric transformation, but it is still too early to say whether Porsche will be upgraded or downgraded.