Porsche’s IPO shows old ties are loosening in corporate Germany
Until now, excluding Deutsche Bank from a leading role in a blockbuster listing had been unthinkable
Germany doesn’t do glitzy initial public offerings. List on the Frankfurt Stock Exchange and you will get shots of executives posing awkwardly next to the city’s own bronze bull statue, but no fashion models and none of the over the top TV coverage enjoyed by New York market debutants.
Enter Porsche. Germany’s most coveted and profitable auto brand is — after much cajoling — being let loose on the market by its owner Volkswagen, with a partial flotation planned for the end of the year, the war in Ukraine permitting. The IPO will probably eclipse Deutsche Telekom’s record-breaking 1996 offering in terms of cash raised and any other German IPO in terms of media excitement.
Yet when a row of 911s parade through Germany’s financial capital ahead of the bell-ringing ceremony, bankers at the country’s largest lender will be looking on wistfully from their Frankfurt skyscraper. Neither Deutsche Bank, nor its European rivals Barclays and BNP Paribas, are taking a leading role in the IPO.
Instead, in what one industry observer described as a “slap in the face” for European investment banks, VW chose a US-only quartet of Goldman Sachs, Bank of America, JPMorgan and Citi to act as global co-ordinators.
There is of course nothing new about US banks encroaching on European territory. JPMorgan has acted as a bookrunner on 223 European IPOs with a combined deal value of more than $45bn since the 2008 financial crisis, according to data from Dealogic, while Deutsche Bank had 131 deals worth $28bn in its home region during the same period. But until now, excluding Deutsche Bank from a leading role in a blockbuster IPO had been unthinkable under corporate Germany’s omertà-like code of loyalty.
VW insists that the Americans simply did better in a meritocratic selection process, which involved bank bosses such as Deutsche Bank’s Christian Sewing recording video paeans to Porsche in an attempt to win the work.
Not all US pitches were successful either. Morgan Stanley, which refused to extend further credit to VW in the wake of the diesel emissions scandal, was among the banks that failed to win a top spot.
Plus, Deutsche Bank’s recent record in the auto sector is hardly stellar, having presided over the flotation of VW truck unit Traton in 2019, which languishes well below its listing price, and the IPO of Aston Martin, which remains a masterclass in value destruction.
Though VW’s complex ownership structure forces it to list Porsche in Frankfurt rather than the US, it has also been doing its best to convince investors that it is first and foremost a global — rather than a German — company and that it ought to attract US-style sticker prices as a result. One VW manager recently lamented that Rivian, which had not sold a single electric vehicle when it achieved a $66bn valuation last year, was deemed to be worth as much as two-thirds of VW, which sold 450,000 electric vehicles in 2021.
Still, the exclusion of Deutsche Bank, which has a former VW executive on its supervisory board, shows old ties count for less than they used to as European businesses race to tap the biggest capital market in the world.
“The US banks are just not standing still, while the Europeans are slow to move,” says Eriola Shehu Beetz, a partner at BCG who advises the industry. The lack of auxiliary services such as equities trading, which Deutsche Bank axed, had made European banks less attractive, she added. They also struggle to compete with their richer US rivals for the best staff.
Porsche has long said it would not build a factory in China, arguing that its customers were happy to pay for the “Made in Germany” tag. The same cannot be said for the country’s biggest investment bank.