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https://www.undervalued-shares.com/weekly-dispatches/the-worlds-best-investors-part-1-karl-ehlerding-exclusive-interview-marking-his-80th-birthday/aff/9/
* Some investors critical of this, with Porsche due to IPO
* They say this adds to corporate governance worries (Adds details from source on IPO)
By Victoria Waldersee and Ilona Wissenbach
BERLIN/FRANKFURT, July 25 (Reuters) - Volkswagen investors believe incoming CEO Oliver Blume will struggle to lead both the Volkswagen Group and Porsche - and to pull off a planned listing of the sports car maker while wearing both hats.
Friday's announcement that group CEO Herbert Diess would be replaced by Porsche boss Blume has rekindled investor concerns about corporate governance problems at Europe's top carmaker, which some shareholders have said weigh on the stock's performance.
"Blume can't take care of everything ... this underscores the bad corporate management at Wolfsburg," said Ingo Speich, head of sustainability and corporate governance at top-20 Volkswagen investor Deka Investment, referring to the German carmaking group's headquarters.
"It is poison for the Porsche IPO," Speich added. Volkswagen plans to list the luxury cars division in the fourth quarter.
Porsche AG may already have to go public at a steep discount if it decides to go ahead with the listing as economic obstacles mount, Reuters reported last week.
Those concerns have been exacerbated by questions over how Blume can manage his dual role.
"Mr Blume will maintain his role as CEO (of Porsche AG) including after a possible IPO," Volkswagen said on Monday in response to Reuters' questions.
Diess, meantime, will fulfil his contract that runs until October 2025 but in an advisory capacity, a person familiar with the matter said.
Just days before his appointment was announced, Blume and other Porsche AG executives speaking at its capital markets day sold a possible listing of the sports car brand as a means to give it more independence and entrepreneurial freedom while raising funds for the group.
His dual role calls that independence into question, analysts at Stifel and UBS said.
"Such a double mandate can only exist temporarily in an emergency situation - it won't work in the long term," said Ulrich Hocker of the German Association for the Protection of Securities (DSW), which represents retail investors.
Still, most do not at this stage expect a delay to the listing. Some, including car industry veteran Ferdinand Dudenhoeffer speculated Porsche finance chief Lutz Meschke may eventually take over from Blume at the sports car brand.
COMPLEX WEB
A person familiar with the matter said it would take a couple more weeks to see what the management changes really meant for the IPO, adding Blume would fill both roles for the foreseeable future.
"We trust Blume with the management of the Group, but it is hard to imagine that he will be able to fulfil the dual role of managing the interests as CEO of Porsche AG and the Volkswagen Group in the long term," said Hendrik Schmidt, corporate governance expert at asset manager DWS.
Schmidt said that one reason for what he described as problematic decisions was the lack of independent members on Volkswagen's supervisory board. According to Eikon, DWS owns around 2% of Volkswagen's preference stock.
In its statement on Friday, Volkswagen did not outline any succession planning for Blume at Porsche.
Volkswagen's share price has nearly halved since March 2021, underperforming a 17% drop in the STOXX Europe 600 Automobiles & Parts Index over the same period.
The carmaker answers to a complex web of investors - its supervisory board controlled by workers' representatives and regional government, and a holding company owned by the Porsche and Piech families, staffed in part with Volkswagen executives.
Porsche AG's Meschke is on the board of Porsche Automobil Holding SE, Volkswagen's top shareholder and owner of more than half its voting rights, while Volkswagen's chairman Hans Dieter Poetsch is its CEO.
Tensions over who pulls the strings in Wolfsburg have spelled the end of the road for several Volkswagen executives before Diess, with former CEO Bernd Pischetsrieder and former VW brand chief Wolfgang Bernhard forced out of their jobs in the late 2000s after repeated clashes with the works council.
While Diess is largely given credit for Volkswagen's pivot to electrification - lifting the carmaker from the reputational ruin of the Dieselgate scandal to leading Europe's electric car market - the governance issues caused by his confrontational approach to leadership ultimately weighed on the investment case, analysts at Stifel Europe Equity Research said.
"Poor corporate governance makes many investors shy away," Janne Werning, who heads ESG Capital Markets & Stewardship at Union Investment, a top-10 shareholder in Volkswagen, said at the carmaker's annual general meeting (AGM) last year.
Union Investment, which repeated its criticism of Volkswagen's governance at the most recent AGM in May, declined to comment for this article. (Report
If we are intact heading into a recession then we may see POAHY go lower. However the current price is still a worthwhile place to start a partial position & add more later.
So What About Investing Now?
Our only source of information about the Porsche IPO is the two company boards, so we don’t expect that it will happen fast. Therefore, we have plenty of time to analyze the potential of the upcoming IPO.
The reason for such a move could be Volkswagen’s inability to sponsor its own initiatives. Since the announcement of the whole electric vehicle direction, the company now needs vast funds to invest in R&D including self-driving technology. But because of a difficult corporate structure there are only two ways Volkswagen can raise funds: by issuing bonds or by investing its cash flow.
Taking Porsche for an IPO is a great alternative to raise funds. The auto manufacturer has been growing in terms of volume and sales for a long time due to its remarkable quality, prestige and brand recognition. While Porsche’s 301,900 sales only make up 3.5 per cent of the Volkswagen Group’s 8.6 million sales in 2021, the profit margin from cars is so high that it constitutes 11% of the group sales.
Porsche also cares about the ecological trend and unveiled plans to produce a fully electric version of the Macan by the end of the year.
With that being said, the Porsche car itself is a good investment because luxurious cars with the current inflation are typically sold at the same price they were bought for. But of course buying stocks is cheaper and can bring profits much faster, so we are really looking forward to the Porsche IPO.
Porsche itself is not a publicly traded company yet. However, it’s a part of Volkswagen Group, a public company whose shares you can buy on European stock exchanges. Now the boards of two auto manufacturers are discussing details of the upcoming IPO and according to their statements Porsche might go public later in 2022.
How much is Porsche worth?
The current valuation of the luxury automaker ranges between $71 billion to $142 billion. The final valuation will be done during the IPO and then we’ll have to look at the market cap, which depends on the stock price.