Ferrari Going Public
You might not be able to buy a Ferrari anytime soon, but you’ll be able to own Ferrari as a company, at least part of it anyway. An initial public offering of Ferrari shares will be issued before the end of the year, and Fiat Chrysler Automobiles CEO Sergio Marchionne says the company will be valued at over $11 billion dollars. To put it in Ferrari terms, that’s 288 1962-1964 Ferrari 250 GTOs, sold at top dollar, or 7,846 2014 Ferrari LaFerraris.
“There are clear expectations from ourselves as Ferrari brand is unique,” Marchionne said recently at the introduction of the new 2016 Fiat 500 in Turin, Italy. “There is also a scarcity value as we are just selling a 10 percent stake.”
It was announced last year that FCA would spin off 10 percent of Ferrari to raise roughly $55 million in capital to achieve the ambitious goal of increasing FCA sales by 50 percent by the end of 2018 to seven million vehicles. The first step in reaching this goal will be to pull FCA out of the red, and things are trending in the right direction. Bloomberg says FCA shares have risen by about 33 percent this year.
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Why it matters
The IPO was announced shortly after Marchionne ousted long-time Ferrari CEO Luca di Montezemolo, who oversaw one of the most profitable periods in Ferrari’s history. Despite capping sales at around 6,500 cars a year, Ferrari accounted for 12 percent of FCA profit and currently an incredible 60 percent of the group’s total value.
Despite capping sales at around 6,500 cars a year, Ferrari accounted for 12 percent of FCA profit and currently an incredible 60 percent of the group’s total value.
Piero Ferrari, son of company founder Enzo Ferrari, will retain his 10 percent stake in the company, while the remaining 80 percent will be distributed to other FCA subsidiaries. Marchionne went on to provide details on the IPO, saying it will be listed on the New York Stock Exchange as a Dutch holding with fiscal residence in the United Kingdom.
With a company as steeped in tradition and specialized as Ferrari, you have to worry when it starts having to answer to investors who often value short term yields over screaming V-12s.
When Marchionne stepped into the leadership role at Ferrari, he suggested it was under the pretense of fixing the company’s struggling Formula 1 team. There might be a kernel of truth to that, but Marchionne is almost certainly looking to increase production at Ferrari and leverage its profitability for the greater good of FCA. Marchionne has previously promised that this confluence of factors won’t dilute Ferrari as a brand.
Interesting times at Ferrari.