
Porsche's derivatives success a mystery
“We have increased our stake in Volkswagen in several steps and we have had options secured to make sure that, with the rising price of the Volkswagen shares, we would not be negatively affected. There have been significant earnings resulting from those transactions,” said a spokesperson for Porsche.
“Porsche’s strategy is a well-kept secret,” said Georg Stuerzer, co-head of German equity reseach at UniCredit in Munich. “What we know is that it had options to increase its stake in Volkswagen, and that it has made €3.593 billion on these options, but we know nothing of the strategy and whether these were cash profits or down to fair-value accounting based on international financial reporting standards.”
“There are a number of possibilities,” said Philippe Houchois, analyst at JP Morgan in London. “They could have just bought options very early on, which would have allowed them to purchase more Volkswagen shares at a low price. These options would have been in-the-money and would have resulted in a mark-to-market gain of the share price at year-end in July, minus the price paid for the options.”
In addition to the earnings from options, Porsche has benefited from a one-off revaluation of its share in the Volkswagen group, which resulted in a €520.8 million addition to its accounts, and €702.4 million of earnings accrued by its 22.5% share held at the end of the business year.
Earnings from the company’s core business - making cars – have, however, been limited. “What seems to be clear is that Porsche’s earnings have plateaued,” said Houchois. “If you restate the non-recurring earnings, Porsche’s core earnings for actually making cars appear to be down by 30-35%.”
Some, however, say the use of derivatives in the Volkswagen investment has been a smart move. “Porsche is a fairly small company, so it is wise to limit the capital it puts in such a transaction. And if its long-term target is to increase its stake in Volkswagen, then why should it not buy options to secure its entry level?” asked Stuerzer.
See also: Cautious Porsche
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Risk management
Ion cyber outage continues as banks rely on workarounds
ABN Amro, Macquarie, RBC among firms hit; ransom deadline tomorrow, but service may be down for days
Grim repo warning spotlights BNP Paribas booking model
Federal regulators may be targeting French bank’s Paris-based book of US Treasuries
Lifetime achievement award: Stephen Kealhofer
Risk Awards 2023: KMV co-founder helped usher in a new era of credit risk analysis – at banks and investors
Risk Awards 2023: The winners
BNP Paribas takes top derivatives prize, lifetime award for Stephen Kealhofer, Nomura wins rates
Markets Technology Awards 2023: This year’s model
Vendors are offering greater modelling flexibility. What if that’s not enough?
Op risk data: Wells Fargo walloped to the tune of $1.7bn
Also: AML breaches at Danske and Santander; Russia’s Radiotechbank scammed. Data by ORX News
Court allows lawsuit against Credit Suisse to proceed
Shareholder alleges board and senior execs breached fiduciary duties by failing to oversee risk
NSCC and OCC to enhance co-operation on large cash calls
New deal would improve management of options expiries, but will stop short of cross-margining