Ahead of Volkswagen’s IPO of Porsche AG in a few weeks, hedge fund Millennium International Management has built a large short position in Porsche SE.
According to data from research firm Breakout Point, Millennium disclosed a position representing 0.6% of the company’s shares on 14 September. A rough estimate based on current market capitalisation would see the hedge fund’s short position at around €126m.
Ivan Ćosović, founder of Breakout Point, said this was the first time any firm had disclosed a short position on Porsche SE.
Porsche AG and Porsche SE are not the same company. Porsche SE, the stock Millennium is short, serves as a holding company for Volkswagen Group. It is majority owned by the Porsche–Piëch family — the family owns 50% of Porsche SE’s stock and holds 100% of the voting rights in a dual class structure.
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Porsche SE currently is the largest shareholder of VW. At the end of 2021, it held 31.4% of VW’s stock and the majority of shareholder voting rights.
Porsche AG, which is a part of Volkswagen Group and the company for which VW is planning a separate IPO, is the iconic luxury car manufacturer that most associate with the name.
VW plans to sell 25% of Porsche — making 12.5% of Porsche’s stock available to investors in an initial share sale that could raise up to €10.6bn. That would value Porsche at as much as €85bn.
Porsche SE will buy the other 12.5% at IPO price plus 7.5%.
“IPOs typically get a lot of scrutiny by money managers, and it is not unusual that big shorts pop up soon after IPOs,” Ćosović told Financial News.
Porsche AG’s IPO is a potential bright spot in an otherwise sluggish listing environment. Compared with the first half of 2021, global IPO volumes are down 46%, with capital raisings falling by 58%.
Millennium is not the only firm signaling that the European market is on a downward trend, as soaring inflation, the war in Ukraine and its spillover effects into energy weigh on investors. At the end of August, Bridgewater reported short positions in European stocks valued at €4bn.
Millennium declined to comment on its short position.
Given the byzantine ownership structure of VW, this could be a rare case where a big short appears before the formal IPO.
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Like with how Porsche SE is structured, the Porsche AG stock being offered to investors will have no voting rights while the stock that is earmarked for Porsche SE and by extension the Porsche–Piëch will be voting shares.
The luxury car brand is one of the more profitable businesses within VW’s automotive portfolio. Though it accounts for less than 3% of passenger car sales, it generates 50% of the pretax profit in that division. Porsche AG sold 300,000 new cars last year, up 11% from 2020.
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