Volkswagen AG has lined up commitments from anchor investors including the Norwegian sovereign wealth fund as it pushes ahead with a listing of its Porsche AG unit, people with knowledge of the matter said.
Norges Bank Investment Management has agreed to buy stock in what’s set to be one of Europe’s largest initial public offerings, the people said. VW is discussing seeking a valuation of around 70 billion euros ($70 billion) to 85 billion euros, the people said, asking not to be identified because the information is private.
At the top end of that range, Porsche would be valued at almost as much as VW. Preference shares in Europe’s biggest carmaker have fallen by roughly 23% over the last 12 months, giving it a market value of 89 billion euros.
Other big-name investors like T Rowe Price Group Inc. have separately indicated interest in subscribing to the Porsche IPO, Bloomberg News reported last month. Qatar Investment Authority has made a preliminary commitment to buy a 4.99% stake, VW said this month.
Dietrich Mateschitz, the billionaire founder of energy drink brand Red Bull, also held talks about buying stock in the offering, the people said. However, he is no longer likely to proceed with an investment after the collapse of a potential Formula 1 partnership between Porsche and Red Bull, two of the people said.
VW aims to finalize a price range for the Porsche offering over the weekend and start taking investor orders early next week, the people said. The company is telling fund managers that preliminary investor interest is already enough to cover the deal several times over, one of the people said.
Deliberations are ongoing, and details of the share sale could still change, the people said. Representatives for VW, Porsche and Norges Bank Investment Management declined to comment. A spokesperson for Mateschitz didn’t immediately respond to emailed queries.
The listing is set to reopen European markets, which have been largely shut for the most part of the year with investors shying away from equity offerings due to an energy crisis following Russia’s invasion of Ukraine, higher interest rates and elevated inflation.
IPO investors will be sold preferred shares in Porsche that don’t carry voting rights. The billionaire Porsche and Piech clan, which controls VW, is separately buying common stock that will give it a blocking minority stake in Porsche.
Analysts at HSBC Holdings Plc, which doesn’t have a role on the offering, wrote in a note Tuesday that Porsche is worth just 44.5 billion euros to 56.9 billion euros. The carmaker’s pricing power may wane as supply recovers over the next two years, while demand may take a hit under a recessionary environment, analysts including Edoardo Spina wrote.
Besides volatile markets, Porsche is also contending with corporate governance concerns. Some investors have voiced doubts about the surprise appointment of the unit’s chief executive to the helm of VW, which will continue to hold the bulk of its shares.
The share sale will help direct funds to Europe’s biggest carmaker to foot the staggering cost of electrification and software development.