Ferrari’s parent owner, Fiat Chrysler Automobiles, will float a 10 per cent of the Italian car company on the New York Stock Exchange today. A further 80% stake will be redistributed among its existing stockholders, leaving the final 10% in the hands of the Ferrari family.
You’ll need deep pockets if you’re looking to invest, however, as FCA hopes to raise somewhere in the region of US$1 billion from the flotation. That values Ferrari in the region of $10 billion – half the value of the entire FCA empire. The money raised will further FCA’s expansion plans to become one of the biggest automotive empires in the world.
As part of the IPO, Ferrari will pay FCA around $3.2 billion in cash notes, which will mature in six months’ time, effectively meaning that FCA stands to gain over $4 billion in liquidity.
The move towards an IPO has been in play for some time, but the wheels only really started turning when Ferrari’s then-chairman, Luca di Montezemolo, stepped aside late last year. Montezemolo had been a staunch opponent of a public flotation, and his ongoing battle with FCA CEO Sergio Marchionne was ultimately a contributing factor to his removal.
With barely 7,000 cars sold worldwide per year at a starting price north of $200,000 each, Ferrari’s market share is tiny to say the least. Its small production numbers give the brand incredible exclusivity, and its historic presence in Formula 1 as the sport’s oldest and most successful constructor gives it the kind of advertising that money simply cannot buy. It’s a rarely acknowledged fact that Ferrari doesn’t do any direct advertising.
Indeed, Ferrari still makes significant revenue from its Formula 1 programme, despite the expenses involved. Much of these costs are covered by its sponsors (most notably, Philip Morris International and Shell), as well as the significant income it has negotiated with the Formula One group where it takes 5% off the top of the revenues from the sport before any of the other prize money is carved up. That figure alone is at least $200 million.
There are further income streams from its customer engine and technology supply deals with Sauber and the Manor Marussia team – the Haas F1 Team and (possibly) Toro Rosso will be added to the list in 2016 – as well as its licensing and merchandising activities.
For those of you interested in investing, it will be labelled under the stock ticker symbol RACE.
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