Could a Porsche IPO Price Double Like Ferrari’s Did?
Was the Ferrari IPO a fluke or can it be repeated?
Automakers who produce or own luxury and high-end auto brands have certainly noticed the outperformance that’s come from Ferrari since it made its public debut.
The storied automaker underwent an IPO in 2015 in an attempt to unlock value. Fiat Chrysler owned 90% of the company, with the Ferrari family retaining the other 10%. During the IPO, Fiat floated a portion of its shares to the public.
Ferrari didn’t have much mojo as a public stock at first, taking a year for it to get back to the same levels as its first few days of trading in the mid-$50s. Since then, though, shares have galloped higher, now changing hands at $122, more than double its IPO price.
It’s given Ferrari a market cap of almost $22 billion and really the only premium valuation among global automakers, with exception to Tesla .
It’s market cap is just below that of its parent company, which commands a $25.2 billion valuation despite owning a number of brands ranging from Fiat, Chrysler, Dodge, Jeep, Maserati and Alfa Romeo to Ram Trucks and more. Also worth noting is that Ferrari generated net income of $535.4 million and revenue of $3.41 billion in fiscal 2017, vs. Fiat, which generated $3.49 billion in income on $110 billion in sales, respectively.
See what I mean? Fiat’s bottom line is larger than Ferrari’s top line, yet the market has assigned almost the same market cap to each entity. Granted, the companies are quite different, where one is largely a producer of everyday vehicles and the other manufactures super high-end premium rides for a wealthy and loyal fan club.
Could Porsche be next?
Porsche IPO
The company isn’t as high-end as Ferrari, but it’s still considered a premium automaker. Porsche has a loyal and wealthy customer base as well and has seen its cars turn into collectibles over time.
On Friday, Porsche CFO Lutz Meschke said a Porsche IPO could easily top the valuation of Ferrari. Like Fiat, Volkswagen currently has an umbrella of brands that house names like Porsche. However, should a potential IPO also include other high-end Volkswagen brands like Lamborghini, Bentley and Bugatti, one would think that the market cap would certainly top that of Ferrari, likely by several magnitudes.
In fact, Meschke reportedly said that a valuation in the 60 billion to 70 billion euro range ($69.5 billion to $81 billion) “doesn’t sound like a stretch.”
For its part, the automaker has since publicly denied that an IPO is on the table, but it’s certainly got some investors thinking.
A valuation of this size would make Porsche and potentially other brands under the same trading vehicle one of the most valuable on earth. General Motors commands a market cap of roughly $45 billion, while Ford Motor trades with a sub-$35 billion market cap.
Daimler , which owns Mercedes-Benz, is worth almost $60 billion. One could make an argument that Mercedes should command a higher valuation than GM, Ford and Fiat, but as of right now, its P/E-based valuation is roughly in line with the Big Three.
Volkswagen has a market cap near $70 billion, so if a new entity containing some combination of Porsche, Bugatti, Bentley and Lamborghini achieve a similar market cap while leaving Audi, Volkswagen (both commercial and consumer vehicles), Skoda and others, it would almost certainly unlock value for shareholders.
That doesn’t seem to be on the table right now, but even spinning out one or two of these brands, such as just Porsche or Lamborghini, could pay big-time dividends to Volkswagen. The question is whether Volkswagen will follow in Fiat’s footsteps, but the answer seems obvious on what it should do.
Originally published at barkerrr.com on October 23, 2018.
