What's going on?
Volkswagen announced on Tuesday that it’s planning to list Porsche on the stock market, as the world’s biggest carmaker really leans into its midlife crisis.
What does this mean?
Volkswagen is desperately trying to redefine itself, having announced in December that it’s increasing its investments in electric vehicles (EVs) by 50% over the next five years (tweet this). But that money has to come from somewhere, and an initial public listing (IPO) of Porsche – which was taken over entirely by Volkswagen in 2012 – could be the answer to the carmaker’s prayers. It’s not clear how many shares Volkswagen plans to sell, but even a handful should go a long way: Bloomberg estimates that Porsche’s IPO could value the company at as much as $96 billion.
Why should I care?
For markets: Porsche doesn’t need Volkswagen.
That $96 billion valuation is even more impressive when you consider that Volkswagen is worth $129 billion, while Porsche’s supercars make up just 3% of the vehicles Volkswagen sells. So if Bloomberg is right, Porsche accounts for 74% of Volkswagen’s current market value. But Porsche is a lot further ahead than Volkswagen in its EV plans, with analysts expecting roughly half of its sales to be electric by 2025 – five years earlier than its parent company. Throw in Porsche’s much higher profit margins than the rest of Volkswagen’s businesses, and the luxury carmaker is arguably a much more appealing proposition.
The bigger picture: Just pretend we’re not here.
Ford’s also well aware of investors’ penchant for EV stocks, which might be why the American carmaker said late last week that it’s looking to separate its EV division from its century-old legacy business. Ford did say it considered listing the division on the stock market, but it’s more likely to turn it into its own segment that’ll report its own separate financial results. That should make it easier for investors to value its EV business, and should push up the valuation of the company as a whole.