Volkswagen Plans IPO for Porsche Brand. Investors Can Get in Now. -- Barrons.com

Al Root 

It's official: A Porsche brand initial public offering is coming.

Volkswagen (ticker: VOW.Germany) announced the decision on Monday. The German auto maker will list stock in Dr. Ing. h.c. F. Porsche AG in late September or early October.

Dr. Ing. H.c. F. Porsche AG is actually the company that makes the cars. That's what most people think of when they think of Porsche.

Porsche Automobil Holding (POAHY) is another Porsche-named company. It is, essentially, a holding company that has about 53% of the common stock in Volkswagen. Automobil Holding's market capitalization is about $21 billion. The company's stake in Volkswagen is actually worth about $28 billion. It's trading at a roughly 25% discount.

When the Dr. Ing h.c. F. Porsche AG IPO comes, Volkswagen will retain a stake. It will become easier to value the sports-car maker inside of the larger Volkswagen business. If the plan works, Volkswagen stock will get a valuation bump.

U.S. investors interested in trying to arbitrage that idea today can buy either the Automobil Holding American depositary receipts -- "POAHY" -- or the Volkswagen ADRs "VWAGY." Those investors won't get any stock in the Porsche sports-car brand IPO. Instead, they get the benefit of any valuation bump.

Just how big the bump will be is hard to say. Investors, today, of course, know that the Porsche sports car brand is inside of Volkswagen and they still value stock in the overall VW entity at about $83 billion, which is just about five times estimated 2023 earnings.

That's a low multiple. But Volkswagen European peer Stellantis $(STLA)$ trades for just three times earnings.

There, of course, is no guarantee buying Volkswagen or Automobil Holding stock before the Porsche sports-car IPO will work. And like any investment, investors should first feel comfortable owning Volkswagen and all its brands at current prices. Volkswagen shares rose about 2.7% in Frankfurt on Tuesday.

Volkswagen's U.S.-listed ADRs have fallen about 38% this year. Porsche Automobil Holding shares have declined 25%. The drop of the European-listed stocks is less than the U.S. ADRs because the value of the euro has declined vs. the U.S. dollar by about 13% so far in 2022.

Write to Al Root at allen.root@dowjones.com

$(END)$ Dow Jones Newswires

September 06, 2022 03:35 ET (07:35 GMT)

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