The hedge fund Millennium International Management has built up a sizable short position in Porsche SE ahead of Volkswagen's IPO of Porsche AG in a few weeks.
Breakout Point investigation shows that on September 14, Millennium revealed a holding worth 0.6% of the company's shares. Based on current market capitalization, a preliminary calculation places the hedge fund's short position at about €126 million.
The founder of Breakout Point, Ivan "osovi," claimed that no company had previously revealed a short position in Porsche SE.
Porsche AG and Porsche SE are two separate businesses. Volkswagen Group's holding company, Porsche SE, is represented by the stock Millennium is short. The Porsche-Pich family holds a majority stake in the company, owning 50% of Porsche SE's stock and 100% of the voting rights in a dual class structure.
Currently, VW's largest stakeholder is Porsche SE. It had the majority of shareholder voting rights and held 31.4% of VW's equity as of the end of 2021.
The company most people connect with the name is Porsche AG, a unit of the Volkswagen Group and the one for which VW is preparing a separate initial public offering (IPO).
In a first share sale that might raise up to €10.6 billion, VW aims to sell 25% of Porsche, making 12.5% of Porsche's equity available to investors. That might put Porsche's value at €85 billion.
At the IPO price plus 7.5%, Porsche SE will purchase the remaining 12.5%.
Financial News was told by osovi that money managers "usually pay close attention to IPOs, and it is not unusual for huge shorts to emerge shortly following IPOs."
A potential bright light in a generally gloomy listing environment is Porsche AG's IPO. Global IPO volumes are down 46% and capital raisings are down 58% from the first half of 2021.
Inflation that is out of control, the conflict in Ukraine, and its repercussions on the energy sector are all weighing on investors, and Millennium is not the only company warning that the European market is in decline. Bridgewater reported short holdings in European stocks of €4 billion at the end of August.
As for Millennium's short position, it chose not to comment.
Given VW's complicated ownership structure, this might be a unique instance where a large short develops before to the official IPO.
The Porsche AG stock being sold to investors will not have voting rights, similar to how Porsche SE is constituted, but the stock designated for Porsche SE and consequently the Porsche-Pich will have voting shares.
Within VW's automotive portfolio, the luxury automobile brand is one of the more lucrative operations. Despite making up less than 3% of passenger car sales, it contributes 50% of the division's pretax profit. In 2018, Porsche AG sold 300,000 new automobiles, an 11% increase over 2019.
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