FCA Split With Ferrari Now Complete, Ferrari Shares Struggle In First Trading Day In Milan
It was simply a question of ‘when’ as opposed to ‘if’ it was going to happen, but finally, it can be put to rest. Ferrari has officially broken away from Fiat Chrysler Automobiles (FCA). The move has been years in the making and all signs pointed to an eventual split when the Italian automotive giant announced Ferrari’s initial public offering back in October 2015. With the spin-off completed, FCA’s current shareholders are entitled to receive one common share in Ferrari for every ten shares they have in Fiat Chrysler. In addition, individuals who hold FCA mandatory convertible securities are allowed to receive 0.77369 shares of Ferrari for each MCS unit of $100 in notional amount. Following the separation, a total of 188,923,499 common shares in Ferrari are outstanding, while the issued common shares in the capital of Ferrari stands at 193,923,499.
These shares account for 80 percent of the company’s ownership, which until today, was controlled by FCA. Ten percent of the company is still owned by Piero Ferrari, the son of Ferrari founder Enzo Ferrari, while the other ten percent was floated as part of the company’s IPO late last year.
FCA shareholders who also participate in the company’s loyalty voting program are entitled to receive voting shares in the same proportions - one special voting share of Ferrari for every 10 special voting shares of FCA. All in all, 56,497,618 special voting shares were issued and are outstanding as of the completion of the Maranello-based company’s split from its former parent company.
Despite the major shakeup, Ferrari common shares will continue to be traded on the New York Stock Exchange under the now familiar RACE ticker symbol. Likewise, these common shares have also been approved for listing at the Mercato Telematica Azionario where it began trading on January 4, 2016 under the same RACE ticker symbol. Unfortunately, the company’s debut in the Milan stock exchange stalled after its share prices dipped from €43 to €41.75 amid concerns caused by the unpredictability of the Chinese markets. The shares eventually recovered, closing at €43.46 upon the end of the trading day.
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Why it matters
It’s going to take some getting used to for a lot of people now that Ferrari has decided to go solo after spending the last 30 years under the Fiat umbrella. Both parties did acknowledge that, but each are also excited for the new beginnings that comes with Fiat not being able to rely on Ferrari’s profits and Ferrari not being able to fall back to Fiat. Both companies understandably took their respective hits after the news broke. In addition to Ferrari’s sluggish start in the Milan stock exchange, FCA’s own share opened a third lower as investors began to come to grips with life after Ferrari.
Now that FCA and Ferrari have parted ways, each company can now look forward to building its brand independent of the other. That’s going to be a little more difficult for FCA considering that it still has one of the highest debts in the industry. The company has explored several avenues on how it can drive down costs and boost revenue, but ultimately, cutting ties with Ferrari and reaping the benefits of the cash flow it stands to receive from the shares sale stood as the most beneficial scenario. I won’t even be shocked if FCA follows this separation with a merger of some sort in the pipeline. The company has made some overtures with General Motors in the past, but now that the company’s valuation would have a clearer picture, a return to the negotiating table could be in the cards.
As for Ferrari, it now stands on its own as an independent company, although I don’t foresee any dramatic changes to come out of it anytime soon. We’ll still get our usual heapings of outrageous supercars. Likewise, the Formula One team should still be a point of focus for the company. If anything, I could see the Italian automaker raise production of its models to help keep its profits in solid footing. I don’t think Ferrari will do it at the cost of tainting its exclusivity, but now that it’s on its own, the merits of raising its production cap would be slightly magnified.
In any case, Sergio Marchionne will retain his positions as chairman of Ferrari and chief executive of FCA for the time being, at least until a replacement for one of the two positions emerges.