Unlike 2021, which was marked by a booming global IPO market, 2022 shows relatively weak results in this segment amid high inflation and tight monetary policy of central banks.
If we look at the first half of this year, companies that went public in the US raised only 6% of the volume compared to the same period in 2021.
However, things could be changing with two exciting companies planning to launch an initial public offering before the end of the year – Porsche and Instacart. Let’s look at why these companies are noteworthy and the prospects for their IPOs.
Europe is waiting for one of the biggest IPOs in the history of its most powerful economy, Germany. According to Bloomberg, Porsche, the sports car division of Volkswagen, is planning an initial public offering in the fourth quarter of this year. According to preliminary forecasts, the company could hit the €90 billion mark.
However, certain international events are impacting the announcment. The war in Ukraine has led to stoppages at Volkswagen factories due to a shortage of raw materials for component production. Porsche SE Chief Financial Officer Johannes Lattwein said this could “potentially affect the listing” of Porsche.
On the other hand, Volkswagen needs substantial additional funds to accelerate its plans for electric vehicles. By 2035, all new cars in the EU must be carbon neutral. A more critical factor, however, is that global electric car market leader Tesla has recently opened a Gigafactory in Berlin, which is Volkswagen’s home market. With all this in mind, the Porsche IPO has a solid case for becoming a reality in the near future.
Porsche is sometimes referred to as the crown jewel of the Volkswagen Group. And this is not surprising. In 2021, Porsche generated just 3.5 per cent of group sales, with an operating profit of 26.2 per cent of the group’s total operating profit. As we can see, the company has not only resumed after the pandemic in 2020 but has managed to bounce back and surpass the results of 2019.
Few companies can boast such figures. In addition, the Porsche brand is associated with luxury and excellence, and many people want to feel like they belong. These two factors will contribute to the high demand for the company’s securities during the public offering.
The structure of the future placement is important. It is expected that ordinary stocks and preferred stocks will be issued at the same time. The ordinary stocks will not be listed but remain owned by Volkswagen and Porsche Automobil Holding SE. Up to 25% of the preference stocks will be offered in the IPO. Although the preferred stocks do not give voting rights, their holders have priority in receiving dividends as well as in the event of liquidation of the company.
The inability to gain control of the company could make an Investidea in Porsche unattractive for institutional investors. However, retail investors would benefit from this, as they could buy stocks at a relative discount due to weakened demand.
Another promising company is unicorn Instacart, a food delivery service founded in 2012.
Instacart, like all delivery services, was the beneficiary of COVID-19. It was in April 2020 that the company recorded its first monthly profit of $10 million, and the number of active customers grew by 75 per cent by the end of the year, from 5.5 million to 9.6 million.
In 2021, the company’s revenues and the number of shoppers delivering its products grew by 20% to $1.8 billion and 600,000, respectively. A breakdown of these metrics over the past three years is shown below.
Last year, Instacart raised $265 million in funding with a valuation of $39 billion. In March this year, the valuation dropped by almost 40% to $24 billion due to a sell-off in the technology sector.
The company submitted a confidential order for an initial public offering in May this year. It is expected to take place before the end of the year. Many are waiting for Instacart’s IPO, as it is considered one of the most promising companies in the food delivery segment.