Porsche's IPO Plan Puts These ETFs in Focus

Volkswagen AG VWAGY, on Sep 5, announced that it would float its celebrated sports car maker, Porsche Automobil Holding SE POAHY, in what could be one of Europe’s largest initial public offering (IPO).

The IPO marks a further step in the occasionally fraught relationship the two auto leaders share. Volkswagen intends to plan the IPO at the end of September or the beginning of October this year, subject to capital market conditions.

As part of the preparation for the listing, Porsche’s stock has been split into 50% ordinary shares and 50% nonvoting preferred stock, Volkswagen noted. Porsche will be probably listed on the Frankfurt Stock Exchange. Porsche offers 25% of preferred stock to private investors through the IPO. Porsche is expected to value between 60 billion euros and 85 billion euros ($60 billion and $85 billion).

The Porsche family heirs, who enjoy a majority stake in VWAGY, will buy 25% plus one shares of Porsche AG, or voting stock, through their listed family investment fund, Porsche SE. In 2009, Volkswagen bought 49.9% of Porsche SE’s sports car business, Porsche AG, and in 2012, it brought the remaining part. Now Porsche once again can exert its control over major company decisions.

Porsche’s status and reputation as a luxury brand enabled it to increase prices, making it a cash-spinner for the Volkswagen Group. Porsche’s operating profit jumped 22% in the first half of this year while Volkswagen registered an 8% fall. The IPO would thus be a significant step for Volkswagen to pump up funds to fuel its ambitious EV plans.

Volkswagen will continue to hold the remainder of Porsche’s stock. If the IPO is successful, 49% of its proceeds will be distributed to its shareholders in the form of a special dividend, likely to be paid at the beginning of 2023. The company also plans to offer Porsche’s preferred shares to retail investors in countries, including Germany, Austria, Switzerland, France, Spain and Italy.

If successful, the market debut of Porsche could pave its entry into a number of ETFs in the coming days.

ETFs in Focus

Renaissance International IPO ETF IPOS

The underlying Renaissance International IPO Index is a stock market index based upon a portfolio of non U.S.-listed newly public companies, prior to their inclusion in global core equity portfolios. The fund currently holds 55 assets in its basket, with each accounting for less than 8.58% exposure. The fund has amassed $175.8 million in its asset base while trading in light volume of about 30,000 shares, probably implying additional cost beyond the expense ratio of 0.80%.

First Trust US Equity Opportunities ETF FPX

This ETF focuses on the largest, best-performing and most-liquid U.S. IPOs and follows the IPOX-100 U.S. Index. New companies can find entry into the fund’s holding after trading for a minimum of 100 days. In total, the fund holds 100 securities in its basket with the largest allocation going to the top firm with 5.85% share. The product is tilted toward information technology at 21.5%, while healthcare rounds off the next spot with double-digit exposure. The fund has accumulated $1.1 billion in AUM and trades in volume of about 94,000 shares per day. It charges 57 bps in fees a year.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.