It’s finally here, the Porsche brand Initial Public Offering is coming, and investors can’t wait to get their piece of the pie.
Volkswagen (ticker: VOW. Germany) announced the big decision on Monday, stating that the German auto company would list stock in Dr. Ing. h. c. F. Porche AG in late September or early October.
Dr. Ing. h. c. F. Porche AG is the company that actually makes the cars, which is incidentally where most people’s minds go when they think about Porsche.
Porsche Automobil Holding (ticker: POAHY) is also a Porche-named company; it is a holding company which holds roughly 53% of Volkswagen’s common stock. Automobil’s market capitalization stands at around $21 billion. The company’s stake in Volkswagen is roughly about $28 billion. It’s trading at a discount of about 25%.
When the IPO is finalized, Volkswagen will retain a stake in the company, making it easier for the sports-car maker to be valued inside the larger Volkswagen business. If all goes according to plan, Volkswagen stock will get a huge valuation bump.
The U.S. Investors who are interested in trying to arbitrage that idea today can decide to either buy the Automobil Holding American depositary receipts- “POAHY” or the Volkswagen ADRs “VWAGY.” Investors who choose this route won’t get any stock in the Porsche sports-car brand IPO but rather will receive the benefit of a valuation bump.
It is not readily easy to estimate how big the bump is, although investors know that the Porsche sports car brand is within Volkswagen, and they will opt to value stock in the overall VW entity at roughly $83 billion, which is roughly five times the estimated 2023 earnings.
Investors should be warned that there isn’t any guarantee that buying Volkswagen or Automobil Holding stock before the Porsche sports car IPO would yield any tangible benefits. And like any investment strategy, they should first feel comfortable owning Volkswagen and all its other brands at their current prices. Volkswagen shares climbed roughly 2.7% in Frankfurt on Tuesday.
Volkswagen’s U.S-listed ADRs have dropped roughly 38% this year. Porsche Automobil Holding shares have dropped 25%.
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