Volkswagen (OTCMKTS:VWAGY) subsidiary Porsche is reportedly eyeing a U.S. IPO. At the very least, the company’s CEO has announced he’s exploring the option. Today’s rally of more than 7% in Porsche Automobil Holdings (OCTMKTS:POAHY) has provided a nice boost to those holding POAHY stock. However, VWAGY stock has given up yesterday’s gains and is down more than 5% at the time of writing on this news.
That’s a pretty large divergence, so investors may be scratching their heads on this one. I’ll explain more on why shares of POAHY are racing higher.
How Is POAHY Stock Different From VWAGY stock?
What’s interesting about POAHY stock is it’s an ADR listing. That stands for American Depositary Receipt. Essentially, investors are able to invest in a foreign company without worrying about currency exchange and other issues around buying stocks on foreign exchanges.
POAHY is tied to Porsche Automobil Holding SE (Porsche SE), a company owned by the Porsche-Piech family. It’s a complicated history between Porsche and Volkswagen, but the brass tacks is Porsche SE owned a majority stake in Volkswagen for years after the companies merged their manufacturing operations. As of 2019, Porsche SE controlled about one-third of Volkswagen, but 100% of the production of Porsche vehicles.
Thus, investors in POAHY stock are buying direct exposure to Porsche. Volkswagen’s other brands have underperformed Porsche in recent years. Porsche’s total deliveries dipped only 3% last year due to robust Chinese demand. However, most of Volkswagen’s other brands saw much more dramatic drops.
With an IPO potentially on the table for Porsche, investors appear to be much more inclined to go the direct route with POAHY stock. It’s a less diversified, but more concentrated play on Porsche. Today, that seems to be a preferential thing.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article.