Porsche Shares Up 55% Last Month

Porsche's share prices have been rising and they still have a long way to go with the Volkswagen merger to happen on favorable terms. Preferred shares have risen 55% to EUR 56.90 (US $75.38) this month, probably led by the 80% sales growth in the third quarter.

Despite strong sales of the Panamera and the Cayenne models, the stock is up just 28%, which is relatively low when compared to BMW's 87% gain and Volkswagen nearly doubling the value of its preferred shares to EUR 125 (US $165).

The Porsche and Volkswagen merger is threatened to be slowed down if not completely stalled by a prohibitive tax legislation that made it hard for Porsche to be evaluated. However, the situation is prone to change quickly with Porsche's settling a tax dispute on Nov. 19. Porsche officials hope that a new law concerning the merger tax will probably be implemented next year.

As a precondition for the merger, the company needs to reduce its EUR 6 billion net debt. Porsche should get the 75% vote from preferred stockholders needed to approve their 50% share of an EUR 5 billion capital increase next week.

Taking into consideration Volkswagen's assessment of its stake in Porsche at EUR 4 billion last year and the EUR 20 billion value of Porsche's stake in VW, and deducting EUR 1 billion in net debt and EUR 2 billion in legal and tax risks, the Stuttgart-based carmaker is worth about EUR 21 billion, according to Credit Suisse. With its current market value being lower than estimated, this is a clear indication that its shares could still rise.