One last post about Greenlight Capital’s letter to investors. Below is a excert about Porsche AG, who holds a 35% interest in Volkswagen, an investment that is larger than Porsche’s current market cap.
The PAH3 stub (symbol formerly POR) fell sharply during the quarter, as PAH3 increased its stake in Volkswagen from ~30% to ~35% and the state of Lower Saxony postured that it would consider increasing its stake from ~20% to ~25% in order to keep its veto rights if the European Union deemed that this was necessary. We believe that these actions are providing an artificial bid for Volkswagen shares in the market place. We also suspect the stub value suffered due to liquidations by other funds including a certain failed investment bank that market participants believe held the stub. On a fundamental basis, we believe that Volkswagen is highly overvalued at 21 times estimated 2009 EPS, more than twice the multiple of its peer group.
PAH3’s market cap is €13.3 billion and it has €4.2 billion of net debt. At current market prices, the company’s 35% interest in Volkswagen is worth €28.9 billion.