Wednesday, October 21, 2015

Ferrari's IPO: Bullish about the Prancing Horse?

Ferrari 458 Spider
Photo Credit: Chris Nagy


Car collectors enjoy no only the thrill of owning a vehicle but the culture surrounding the popular brands that have driven our passions and emotions. When collecting Ferrari, the love can be enjoyed with the possession of a multimillion dollar classic like a highly rare 250 GTO or something as little as a one dollar die-cast car. Ferrari aficionados also take pleasure the in full range of merchandise surrounding the ‘Prancing Horse’ brand. Hats, jackets, sunglasses, watches and picture frames are just a few officially licensed items offered to collectors of the Ferrari brand. Ferrari is one of the most coveted brands when it comes to merchandising. Now, for the latest collectible item, why not own a piece of the company ambitious founded by the legendary motorsport figure Enzo Ferrari?

Selling 10 percent of the Ferrari company in an IPO (Initial Public Offering) release on the New York Stock Exchange, the first shares will be offered at $52 a share starting Wednesday morning. Listed on the NYSE (New York Stock Exchange) under the RACE stock symbol, Ferrari’s IPO appeared to have been concealed under the issuer name New Business Netherlands N.V. (NYSE still lists the stock under that title).

After initial estimates that the evaluation of Ferrari would be appraised between 5 and 7 billion dollars, the value of the auto manufacturer has been rated near 10 billion dollars with the share price. The stock sale is estimated to bring close to a billion dollars to Ferrari’s parent company FCA (Fiat Chrysler Automobiles). While the Ferrari brand has been part of Fiat and most recently the Fiat Chrysler Automobiles (FCA) conglomerate, the sports car brand had been permitted to remain a mostly autonomous corporate function.

The initial stock price for Ferrari is one of the richest of any automaker in recent memory. In comparison, FCA’s IPO last year priced a volume of 87 million shares at only for $11. It’s also interesting to note Tesla Motors’ IPO was priced at $17 per share.

In order to sell investors on Ferrari, the Italian sports car builder provided a bullish pledge. By 2019, Ferrari plans to sell 9,000 vehicles per year that equates to a 30 percent increase over current model numbers. The additional sales volume can increase revenue but some purists to the brand are concerned of saturation of the market with Ferrari vehicles. A fine balance will obviously need to exist between meeting demands for the popular sports cars like the Ferrari 488 GTB and insuring the storied brand maintains exclusivity. At 9,000 vehicles, Ferrari will still be well under Porsche and is only one-quarter the volume of vehicle compared to 2014 Chevrolet Corvette Stingray production.

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