The IPO of Porsche shows that old ties in Germany are severing

Germany doesn’t do glittery IPOs. List on the Frankfurt Stock Exchange and you’ll get footage of executives posing awkwardly next to the city’s bronze bull statue, though no models and none of the over-the-top TV coverage New York market debutants enjoy.

Enter Porsche. Germany’s most desirable and profitable car brand is being launched – after much flattery – by its owner Volkswagen, with a partial IPO planned for later this year, should the war in Ukraine permit. The IPO will likely eclipse Deutsche Telekom’s record-breaking 1996 bid in terms of cash proceeds and every other German IPO in terms of media furore.

But when a row of 911s drives through Germany’s financial metropolis before the bell rings, the bankers of the country’s largest credit institution will look on wistfully from their high-rise in Frankfurt. Neither Deutsche Bank nor its European competitors Barclays and BNP Paribas play a leading role in the IPO.

Instead, in what one industry observer called a “slap in the face” for European investment banks, VW selected an all-US quartet of Goldman Sachs, Bank of America, JPMorgan and Citi as global coordinators.

The fact that US banks are encroaching on European territory is nothing new, of course. JPMorgan has acted as bookrunner on 223 European IPOs totaling more than $45 billion since the 2008 financial crisis, according to data from Dealogic, while Deutsche Bank had 131 transactions valued at $28 billion in its home region over the same period. But until now, excluding Deutsche Bank from a leading role in a blockbuster IPO has been unthinkable under Corporate Germany omerta-like code of loyalty.

VW insists that Americans simply did better to win the job in a meritocratic selection process in which bank bosses like Deutsche Bank’s Christian Sewing videotaped eulogies for Porsche.

Also, not all US pitches were successful. Morgan Stanley, which refused to lend more to VW after the diesel emissions scandal, was among the banks that failed to make the top spot.

Also, Deutsche Bank’s recent record in the auto sector is hardly stellar, having chaired it VW truck unit Traton went public in 2019which is far below its list price, and the Aston Martin IPOwhich remains a masterclass in value destruction.

Although VW’s complex ownership structure forces Porsche to list in Frankfurt rather than the US, it has also done its best to convince investors that it is first and foremost a global — and not a German — company and that there are US-style sticker prices as a result. A VW manager recently complained Rivianwhich hadn’t sold a single electric vehicle when it was valued at $66 billion last year.

But the exclusion of Deutsche Bank, which has a former VW executive on its board, shows that old connections count less than they used to as European companies battle for the world’s largest capital market.

“US banks just don’t stand still while Europeans move slowly,” says Eriola Shehu Beetz, a partner at BCG who advises the industry. The lack of ancillary services like stock trading, which Deutsche Bank has scrapped, has reduced the attractiveness of European banks, she added. They are also struggling to compete with their wealthier US competitors for the best employees.

Porsche said so a long time ago would not build a factory in China, arguing that his customers would be happy to pay for the “Made in Germany” label. The same cannot be said for the country’s largest investment bank. The IPO of Porsche shows that old ties in Germany are severing

Adam Bradshaw

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