The long-awaited IPO of Porsche will start in a few weeks. Investors can bet on it through Volkswagen shares.

The biggest IPO of the year has been given the green light. Volkswagen said on Tuesday it would go ahead with an initial public offering of its Porsche sports car division despite the difficult market situation. We'll discuss what this means for VW investors and how to ideally play the IPO in this article.

Porsche's long-awaited IPO is finally approaching

The German automaker, which has been considering the move since February, said it plans to list Porsche on the Frankfurt Stock Exchange in late September or early October.

Porsche's valuation ranges from 60 billion euros ($58 billion) to 80 billion euros, potentially making Porsche's IPO the largest ever on the German market.

Investors will be able to buy Porsche's preferred shares, which carry no voting rights.

Porsche Automobil Holding is the family holding company that owns most of Volkswagen - it will acquire 25% plus one Porsche share at the common stock placement price plus a 7.5% premium to the preferred price.

"Obviously, this is not ideal timing for an IPO and it's a questionable structure from our perspective, especially from a corporate governance perspective. However, given the quality of Porsche's assets, the apparent interest from investors such as Qatar, Bernard Arnault, Dietrich Mateschitz and likely strong interest from retail investors, we expect the IPO to happen," said analysts at Stifel.

Qatar has already agreed to buy a 5% stake, VW said.

What this means for VW investors

VW said it will return up to 49% of the gross proceeds from the IPO in a special dividend to be paid early next year. This dividend could amount to up to €30 per share in the event of a successful IPO.

https://twitter.com/MichalSemotan/status/1566899018038378497

Volkswagen shares rose 2.5% in the initial phase, although the stock is down 17% year-on-year. This recent decline was due to the distrust of some investors (mainly US) in industrial companies in Europe. They seem to think that energy costs will completely wipe out positive margins. In addition, VW is facing a retreat in China. The US market is a tough one for carmakers, only Porsche or Audi have a chance there.

One way to play the Porsche IPO is to buy VW shares. The investment thesis, apart from the aforementioned dividend for VW shareholders, is based on the fact that this transaction could reveal the intrinsic value of the whole Volkswagen. If the stock market now values the entire VW Group at around €85 billion, and if the valuation of Porsche at the IPO is even just €60 billion, it is clear that the value of the other brands in the Group is higher than the remaining €25 billion.

We can also look at this through profit. Porsche generates about 25 percent of the profits of the entire VW group - so if a quarter of VW were worth 60 billion euros, then the entire VW group must logically be worth much more than it is today.

I have invested in VW shares myself recently. I should add that this was not my own investment idea, but was inspired by Michal Semotan of J&T Bank, who often writes and talks about VW shares, and not just on Twitter.

DISCLAIMER: All information provided here is for informational purposes only and is in no way an investment recommendation. Always do your own analysis.