VW investors split on whether Porsche IPO should go ahead

BERLIN -- Volkswagen Group investors polled by Bernstein Research were split on whether an IPO of the group's Porsche brand should go ahead after a leadership change at the helm of the automaker, results showed on Tuesday.

In the poll of 58 investors conducted, 42 percent were in favor of a listing of Porsche and 41 percent against.

Nearly three quarters of investors polled viewed incoming CEO Oliver Blume's dual role leading VW Group and the Porsche brand as negative for the prospects of the listing.

Multiple investors highlighted that Porsche's planned listing was pegged as a means to secure more independence and freedom for the sports-car brand.

VW Group's supervisory board voted on Friday to oust CEO Herbert Diess, to be replaced by Blume from Sept. 1, after Diess's tumultuous tenure marked by the carmaker's transition to electrification and multiple clashes between Diess and the works council and the board.

Some investors believe tha Blume will struggle to lead both the VW Group and Porsche and pull off the planned listing of the sports-car maker.

The announcement that Diess will be replaced by Blume has also rekindled investor concerns about corporate governance problems at VW Group, which some shareholders have said weighs on the stock's performance.

"Blume can't take care of everything ... this underscores the bad corporate management at Wolfsburg," said Ingo Speich, head of sustainability and corporate governance at top-20 Volkswagen investor Deka Investment, referring to VW's headquarters.

"It is poison for the Porsche IPO," Speich said.

Some 63 percent of investors polled by Bernstein voiced concerns that Diess' surprise departure would weigh on stock performance, while 22 percent thought it could improve it.

VW plans to list the Porsche division in the fourth quarter.

Porsche may already have to go public at a steep discount if it decides to go ahead with the listing as economic obstacles mount, Reuters reported last week.

"Mr Blume will maintain his role as CEO including after a possible IPO," Volkswagen said on Monday in response to Reuters' questions.

Just days before his appointment was announced, Blume and other Porsche executives speaking at its capital markets day sold a possible listing of the sports car brand as a means to give it more independence and entrepreneurial freedom while raising funds for the group.

"Such a double mandate can only exist temporarily in an emergency situation -- it won't work in the long-term," said Ulrich Hocker of the German Association for the Protection of Securities (DSW), which represents retail investors.

Most investors do not at this stage expect a delay to the listing. Some, including car industry veteran Ferdinand Dudenhoeffer speculated that Porsche finance chief Lutz Meschke may eventually take over from Blume at the sports car brand.

VW has not outlined any succession planning for Blume at Porsche.

Volkswagen's share price has nearly halved since March 2021, underperforming a 17 percent drop in the STOXX Europe 600 Automobiles & Parts Inde over the same period.

The company answers to a complex web of investors. Its supervisory board comprises workers' representatives and regional government, and members of a holding company owned by the Porsche and Piech families that is staffed in part with Volkswagen executives.

Porsche's Meschke is on the board of the Porsche-Piech family's Porsche Automobil Holding, VW's top shareholder and owner of more than half its voting rights, while VW Chairman Hans Dieter Poetsch is its CEO.

Tensions over who pulls the strings in Wolfsburg have spelled the end of the road for several Volkswagen executives before Diess, with former CEO Bernd Pischetsrieder and former VW brand chief Wolfgang Bernhard forced out of their jobs in the late 2000s after repeated clashes with the works council.

While Diess is largely given credit for Volkswagen's pivot to electrification -- lifting the carmaker from the reputational ruin of the diesel scandal to leading Europe's electric car market-- the governance issues caused by his confrontational approach to leadership ultimately weighed on the investment case, analysts at Stifel Europe Equity Research said.

"Poor corporate governance makes many investors shy away," Janne Werning, who heads ESG Capital Markets & Stewardship at Union Investment, a top-10 shareholder in Volkswagen, said at the carmaker's annual meeting last year. Union Investment, which repeated its criticism of VW's governance at the most recent annual meeting in May, declined to comment for this article.