FERRARI: it’s time to quotation. But who benefits?

 

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With the coming of autumn, the financial world starts up again with all the operations which are set aside during the summer period, due to the low number of market players.

And so, after witnessing the success of the so-called IPO (Initial Public Offering) of Poste Italiane SpA here it emerges one that for many people is the real IPO of the year, even if it doesn’t take place in Milan Stock Market.

This IPO concerns a “Made in Italy” product, which has always been a testimonial of our “Bel Paese”. Obviously I’m talking about Ferrari.

The Ferrari IPO will be publicly traded in New York stock market on October, 21st , an operation that will bring, over time, to the exit of Ferrari shareholder FCA, relinquishing the control to the Agnelli family holding company – the Exor – which will control the Prancing horse with a participation equal to 24%.

The quotation of Ferrari in Wall Street will be structured in this way.

First it will be directly placed in the market the 10% of the company, valuing it at a price in the range of $ 48-52 per share. A very important assessment that will involve an estimation of Ferrari as a whole for an amount of around 8.65 billion euro, very close to that suggested by Marchionne, who hoped to cash out about more than 10%.
But considering the current Automotive situation, we can content with it.

In dollars (remember that at the moment Ferrari will be valued at the NYSE), FCA will gain about 980 millions USD which will be used… to bring down the debt of the company from Turin.
And from this… you can already understand several things.

But the sale of 10% will be just a first step.

Initially FCA will still hold 90% of Ferrari, but then in 2016 there will be the big move. FCA will definitively exit from Ferrari, distributing to the same shareholders the stocks of the Prancing horse.
Is so that it is justified the behaviour of FCA at the stock market: who has Fiat Chrysler shares will have Ferrari stocks, and this is the only way to have the shares (without buying them at Wall Street).

At this point who will control the “Red” of Maranello?
The Exor holding company, at the end of all these operations, will have 24% of the corporation and will command with Piero Ferrari, which will hold a quote of 10%.
Together they will have 34%.

But will it be enough?
Yes because – as clarified by the official document of the placement that supposes also the quotation at the Milan stock market, “the right to vote in Ferrari will depend on a number of special shares”.

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Let’s now try to understand the reason of the quotation of Ferrari.

The first step is very clear: FCA sells in order to canceal the debt.

Second element, the quotation isn’t done by introducing new shares, but simply placing the old shares within the FCA.
So the aim is to make the most of the company, in order to obtain benefits in the balance sheet.

Ferrari represents the goose that laid the golden eggs in the group and this operation is focused to obtain the maximum possible evaluation.

Some financial details

As mentioned before, this operation will evaluate Ferrari approximately 8.65 billion US dollars that is about 7.75 billion euros. Do you know, today, how much capitalizes FCA (Ferrari included)? You can see for yourself sailing on the FCA website. It is about 18 billion euros.

Do you find congruous the two amounts? Ferrari is worth 43% of the whole FCA group.

Perhaps FCA is underestimated or maybe Ferrari is too expensive. The only certainty is that this operation will generate inevitably a revaluation of FCA.

The comparison with competitors

If we try to analyze Ferrari, comparing it with the “competitors” we note that it is definitely NOT cheap.

An average evaluation value, within the range established in the IPO, the implied multiplies for the period 2016 reduce an EV/EBITDA of 13 times, EV/EBIT of 19 times and a price earnings ratio of 29.

I fully understand that these data may be unclear for those who aren’t “technical”. I’ll tell you really in few words they are certainly a “prize” (so expensive) than the average of the sector to which Ferrari is compared, or luxury goods.

But be careful, if we get to the bottom of the matter, we will find also a justification. Ferrari has provided a preview of the third quarter 2015, according to it data are rising sharply thanks to the volume of sales and the currency benefits (strong Dollar), elements that can explain this kind of evaluation.

Therefore, if Ferrari is “properly” evaluated (at a prospectus level), this means that, by force of circumstances (it is maths) FCA eill necessarily benefit in the stock market.

Taking into account both the cancelling of the debt and the enhancement of the Ferrari asset, the result is clear. Ferrari will be the goose that laid the golden eggs but the manager of the “goose coop” could be the one that will obtain the greatest benefits.

Translated by Federica Izzo

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