2023-04-24 16:25:51
Dhe first corporate bond from Porsche Automobil Holding SE started trading on the stock exchange on Monday with high turnover. Until midday, it was the most traded bond on the Stuttgart stock exchange, ahead of the Federal Republic of Germany, which is usually at the top.
Sales in the millions were also achieved on the Tradegate in Berlin and Gettex in Munich stock exchanges. The courses moved by 100.35 percent. The paper was issued under securities identification number A351ML at a price of 99.65 percent. The annual coupon is 4.5 percent. The term ends in September 2028.
The issuer is not Porsche AG, but Porsche SE, which is also listed in the Dax. Their greatest asset is the majority of the ordinary shares in Volkswagen AG. The ordinary shares of Porsche SE, in turn, are wholly owned by the Porsche and Piech families. As part of Porsche AG’s IPO in September 2022, Porsche SE bought shares in the VW subsidiary Porsche AG for a good 10 billion euros, giving it direct access to Porsche again.
Purchase of Porsche shares
The issue proceeds from the bond of 750 million euros will be used to finance the share purchase. A promissory note has already been issued and bank loans taken out. The entire financing package costs Porsche SE less than 4 percent interest per year thanks to early protection against interest rate changes. The inflow of the VW special dividend was also used for the share purchase and future dividends from Volkswagen and Porsche are intended to gradually repay the debt.
It’s no wonder that the bonds are being welcomed with open arms, especially by private investors. Demand has been high for weeks thanks to the rise in interest rates. The bonds from Porsche are also in denominations of 1000 euros and are therefore also easily tradable for private investors. That is by no means all bonds.
Because overall, the situation on the bond market continues to be unfortunate for private investors. For example, around 10,500 corporate bonds are listed on the Stuttgart Stock Exchange, Germany’s largest trading center for bonds. However, 84 percent of this cannot be invested by private investors. With the PRIIP regulation, many corporate bonds have been classified by legislators as packaged investment instruments since 2018 and are thus excluded from access for private investors. “We think this is a damaging situation for retail investors,” said Simon Guntrum, a regulator at the Stuttgart Stock Exchange. “Corporate bonds are very simple and easy-to-understand products, and the packaged investment regime was originally intended for securitized derivatives and funds.”
Hope for relief for private investors
Proposals from the EU Commission on PRIIP regulation are due for the end of May 2023. “There are prominent advocates in politics and among supervisory authorities not to classify corporate bonds as packaged products, so that a change in the regulation seems conceivable,” says Guntrum. So far, a product information sheet has been required for affected corporate bonds so that private investors can still trade them. But the effort To create such a sheet and keep it up to date seems too high for the issuers of the bonds, especially since private investors do not play a major role in the placement of these bonds on the market.
One option is to be classified as a professional investor. “But that’s not so easy,” says Guntrum. “Certain criteria have to be met, such as the minimum investable capital, the number of transactions on the capital market or professional experience in the financial sector.”
It is also unfortunate for private investors that prospectus law in Europe requires a comprehensive securities prospectus if bonds are issued in denominations of less than 100,000 euros. The issuers also shy away from this effort, so that the hurdle for investments is very high. “An amendment proposal to the EU Listing Act, which includes the Prospectus Regulation, was published at the end of 2022,” says Guntrum. “But this does not result in any significant simplifications that would give private investors better access to this market. Regulation intended to protect private investors but leads to a factual exclusion, but cannot be in the interests of the regulator,” says Guntrum.
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