By Dhirendra Tripathi
Investing.com – Volkswagen (DE:VOWG) stock was up 4.5% in German trading Tuesday after the company said it is exploring an initial public offering of Porsche .
The public offering of Volkswagen’s most profitable asset is expected to fuel the valuation of the world’s second largest automaker and help it take on Tesla (NASDAQ:TSLA) in the electric vehicle market.
VW and family holding company Porsche Automobil Holding have negotiated a framework agreement to form the basis for preparing a potential IPO, the company said in a statement.
“The conclusion of the framework agreement is subject to the approval of the management board and the supervisory board of Volkswagen AG (OTC:VWAGY). A final decision has not yet been taken (sic),” Volkswagen said.
Europe’s largest carmaker has a convoluted shareholder structure, which limits its options to raise fresh equity. It relies on its own cash that the business generates, or bonds and loans. A Porsche listing will open up a new avenue for it to raise funds.
The listed Porsche Automobil Holding (DE:PSHG_p) is separate from the sportscar business. It was created more than 10 years back when Porsche tried to wrest control of a much larger VW. The attempt imploded when the 2008 financial crisis led to a fund crunch and the sportscar business came under VW group and Porsche SE stayed a separate legal unit.