Ahead of Volkswagen’s IPO of Porsche AG in a few weeks, the hedge fund Millennium International Management has built up 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 September 14th. A rough estimate based on current market capitalization would see the hedge fund’s short position at around €126m.
Ivan Ćosović, founder of Breakout Point, said this was the first time a 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 for, acts as the holding company for the Volkswagen Group. It is majority owned by the Porsche-Piech family – the family owns 50% of Porsche SE’s shares and holds 100% of the voting rights in a dual-class structure.
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Porsche SE is currently the largest shareholder in VW. By the end of 2021, it held 31.4% of VW’s shares and the majority of shareholders’ voting rights.
Part of the Volkswagen Group and the company for which VW is planning a separate IPO, Porsche AG is the iconic luxury carmaker that most people associate with the name.
VW plans to sell 25% of Porsche – making 12.5% of Porsche’s shares available to investors in an initial share sale that could raise up to 10.6bn. That would value Porsche at as much as €85 billion.
Porsche SE will buy the other 12.5% for IPO plus 7.5%.
“IPOs are typically highly scrutinized by money managers, and it is not unusual for large shorts to appear soon after IPOs,” Ćosović told Financial News.
Porsche AG’s IPO is a potential bright spot in an otherwise sluggish stock market environment. Compared to the first half of 2021, global IPO volumes are down 46%, with capital raisings down 58%.
Millennium is not the only company to signal that the European market is on a downward trend as rising inflation, the war in Ukraine and its knock-on effect on energy weigh on investors. At the end of August, Bridgewater reported short positions in European stocks worth €4bn.
Millennium declined to comment on its short position.
Given VW’s byzantine ownership structure, this may be a rare case where a major short appears before the formal IPO.
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Similar to how Porsche SE is structured, the Porsche AG stock offered to investors will not have voting rights, while the stock earmarked for Porsche SE and by extension Porsche-Piëch will be voting shares.
The luxury car brand is one of the more profitable businesses within VW’s car portfolio. Although it accounts for less than 3% of passenger car sales, it generates 50% of pre-tax profit in that division. Porsche AG sold 300,000 new cars last year, up 11% from 2020.
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