German auto giant Volkswagen Group’s abrupt CEO change could threaten the company’s plan to spin off Porsche, its most profitable brand, as a public company, which automobile analysts estimate could be worth as much as $100 billion.
On July 22, Volkswagen’s board voted to oust its CEO of four years, Herbert Diess, and replace him with Oliver Blume, the chief executive of Porsche, effective September 1. Blume will hold the dual roles as the head of both Porsche and its parent company.
Some investors see Blume’s expanded responsibility as a concern for Porsche’s future. More than 40 percent of Volkswagen investors polled by Bernstein Research say the IPO shouldn’t move forward following the leadership change. A roughly equal percentage of investors say the IPO should proceed.
Bernstein surveyed 58 institutional investors with holdings in Volkswagen from July 23 to July 24. Nearly three quarters of investors view Blume’s dual role as negative for the prospects of the Porsche listing. More than 60 percent polled voiced concerns that Diess’ surprise departure could hurt Volkswagen’s stock performance.
“Bringing a company public is a massive undertaking, so Blume splitting his time between VW and Porsche has raised major concerns with corporate governance and stability of the company,” said Elizabeth McGonagle, an analyst with Renaissance Capital, a manager of IPO-focused ETFs. “Additionally, Porsche is attempting to go public at a time where the IPO window is mostly closed as volatility continues to rock global markets.”
By 2025, Volkswagen is expected to overtake Tesla as the world’s largest maker of electric vehicles by sales volume, according to a Bloomberg Intelligence study in June. However, the German carmaker’s market capitalization is only one-tenth of that of Tesla’s.
Talks of Volkswagen wanting to take Porsche public first emerged in early 2021. The spinoff plan was seen as a way to grow the sports carmaker’s market value and secure financial and operational independence. Analysts predicted Porsche could be worth more than its parent company if the listing materialized.
As of October 2021, that plan was put on hold as the IPO market cooled down and a global semiconductor shortage weighed on Volkswagen’s car production.
Last year, Volkswagen sold 452,900 electric vehicles worldwide, a 100 percent jump from the previous year. Deliveries included about 41,000 units of Porsche Taycan, a rival of Tesla’s high-end sedan, Model S.
When Diess took the helm of Volkswagen in 2018, he promised shareholders to grow the company’s market value to €200 billion ($204 billion) by the end of 2019. The group’s current market capitalization is only €80 billion ($81 billion).