By Michael Candella,
International Business Writer
Ferrari N.V has just filed paperwork in the United States for an Initial Public Offering (IPO) which is currently being valued at around 10 Billion U.S Dollars. US News describes that an IPO occurs when a private company wishes to become publicly traded on the stock market for either increased capital or a change in administration. Most companies that have an IPO are often newcomers or startups on the market, but Ferrari’s years of experience may yield different outcomes than usual.
Wired reported that the founder of Ferrari N.V, Enzo Ferrari, started a formula one racing team in 1929 and started making their first cars by 1947. By the 1960’s Fiat Chrysler purchased a 50 percent stake in the company that later increased to 90 percent at the time of Enzo Ferrari’s death in 1988. Now under the control of Enzo Ferrari’s son Piero, Ferrari has turned into a huge driving force in the Sports Car and Formula One racing industries.
Ferrari plans to open their stock on the NYSE under the ticker symbol RACE. According to the report from the Securities and Exchange Commission, Ferrari will distribute 17.2 million shares to the public at an estimated price of 48 to 52 Dollars per share. Ferrari is currently owned by Fiat Chrysler, which is a multi-national automotive manufacturer and holding corporation. Of the 859 million dollars IPO Ferrari is expected to receive, none of it as the majority of the revenue will go to Fiat Chrysler. As for the remaining 80 percent of shares, they will most likely be distributed amongst Fiat Chrysler investors. In the long-run this IPO was made so Ferrari N.V and Fiat Chrysler can separate into separate entities as a means for Ferrari and Fiat Chrysler to regain “greater operational and financial independence”.
IPO’s in recent weeks have faced many fall-offs as IPO’s are often overvalued at launch causing an almost immediate devaluation, even large companies like Facebook have seen stock drops after its initial public offering. However, according to International Business Times, Ferrari is determined to break that stigma as it boasts over 60 years in its filing with the SEC. Other strengths cited in the filing include Ferrari’s leading edge technology in engine performance and their deep roots in Formula One racing that creates unprecedented brand loyalty in the niche market.
Over the past year, Ferrari has been striving to be seen as even more exclusive for luxury vehicle owners’ by only shipping a mere 7,255 cars in 2014 but this can be seen as a risk factor for potential shareholders who may be skeptical of Ferrari’s luxury business model. Other risk factors identified in their SEC filing include a drop in technological advances when compared to competitors, the heavy impact that Formula One racing has on Ferrari’s brand name, and the overall volatility of the luxury goods market.
Despite Ferrari’s well-known brand and large presence in the automobile industry, this stock may be seen as a hard sell given the current state of the market. The volatility of both Ferrari’s luxury cars and their low production model provide a very vast uncertainty for Ferrari’s IPO. If the IPO were to fail at the launch, it might lead to an ugly separation of both Ferrari and Fiat.
A version of this article appeared in the Tuesday, October 20th print edition.
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