Volkswagen AG (VWAGY -0.33%) recently said that it's moving forward with its plans to take its Porsche brand public through an initial public offering (IPO).
It's not every day that a car company goes public, and investors and car enthusiasts alike are likely watching this one closely. To help you get up to speed on what's happening, here are five things you should know about Porsche's potential IPO.
Image source: Porsche.
1. It could happen in the next few weeks
Volkswagen said in a press release that it's planning to list the shares on the Frankfurt Stock Exchange at the end of September or the beginning of October. Listing the shares is widely viewed as an opportunity for Volkswagen to raise capital as it transitions to electric vehicles.
2. The sports car IPO could fetch a hefty valuation
Analysts estimate that Porsche could be valued between $59.8 billion to $84.6 billion. For context, a nearly $85 billion valuation would give Porsche a market cap just under Volkswagen's $93 billion, more than double the size of Ferrari's -- another luxury car stock many investors love -- and ahead of Ford's $61 billion market cap.
3. It's a good time for Porsche, a bad time for IPOs
Porsche's business is humming along quite nicely right now, with the luxury vehicle maker expecting $39 billion in sales for the full year -- up 20% from 2021.
But, in case you haven't noticed, most auto stocks haven't performed well this year as investors worry about sky-high inflation, supply chain shortages, rising energy costs in Europe, and potential economic slowdowns across the globe. These fears could keep some investors from wanting to buy Porsche's stock right now.
4. Volkswagen's CEO will remain as Porsche's CEO
Oliver Blume, who took over the CEO role for VW at the beginning of this month, will continue to be CEO of both VW and Porsche after the IPO.
This is a particularly unusual move and should give investors some cause for concern. Not only will managing two publicly traded car companies be difficult and time-consuming, but it's easy to wonder if there will be conflicts of interest that will arise for Blume as he tries to run separate companies.
5. There won't be a lot of shares for individual investors
Volkswagen is making just 12.5% of Porsche's shares available to individual investors -- and those shares will be non-voting shares. Meanwhile, the Porsche family, which has a controlling interest in the company right now, will receive preferred shares with voting rights.
VW says that if the IPO is successful, then VW investors will receive a special dividend that will be paid out at the beginning of next year.
Don't hit the gas on Porsche's stock just yet
Some investors are likely looking at Porsche's IPO and hoping for a repeat of Ferrari's successful public offering. While Ferrari's 2015 IPO may seem like a while ago, investors can't help but see similarities between the two luxury vehicle companies.
Ferrari's shares, though down this year, are up more than 200% since the company went public in 2015, and some investors are hoping that Porsche will end up being just as successful in the market.
But it's worth mentioning that when Ferrari was spun off from Fiat Chrysler -- now Stellantis -- its shares were listed on a U.S. exchange, compared to Porsche's upcoming listing on a foreign exchange. This will add additional expenses for Porsche shareholders, including foreign taxes. Not to mention that individual Porsche shareholders won't have voting rights, while Ferrari shareholders do.
Additionally, 2015 was a different world than 2022, and automakers are facing significant headwinds right now. Chip shortages and stubbornly high inflation are just two issues, along with an economic slowdown in the U.K., a war in Ukraine, and an uncertain U.S. economy.
All of this means that investors may want to tread lightly with the Porsche IPO. Porsche could end up being a good long-term auto stock, but there's no need to rush into buying shares at the IPO to benefit.
Instead, it's probably best to see a few quarters of the company's financial results as a publicly traded company and then make a decision on whether to invest in the luxury automaker.
