The Least Expensive Way to Own a Piece of Ferrari

In 2014, Ferrari announced it was splitting off from Fiat and Chrysler, so it could become its own independent brand once again. Nine months later, a spokesman of the FCA Group (Fiat Chrysler Automotive), announced that 10% of Ferrari’s stake (roughly 17 million shares) would be sold in an IPO starting in 2015. Piero Ferrari, the only living son of the founder Enzo Ferrari, would still own 10% of one of the world’s most powerful brands and the FCA Group would retain 80% of the stake.

These announcements stirred the pot with Ferrari’s former chairman, Luca di Montezemolo, who noted that “publicly traded companies are often pressured to put profits, sales and volume over the value of the product and customer satisfaction,” something he wasn’t too thrilled about, since Ferrari had always been known for “our people, our product, our clients” as the company’s key elements for success. Luca di Montezemolo, one of the men viewed as the driving force behind Ferrari’s success, was inducted into the Automotive Hall of Fame in 2015, in Detroit.  He took the opportunity in a pre-interview to state that he’s “hoping that the clients will remain more important than the analyst or the investor or the financial markets.” His induction in the Hall of Fame was on the same day Ferrari filed paperwork with the U.S. Securities and Exchange Commission for a prospectus.

Ferrari officially priced its initial offering at $52 per share and went public on the New York Stock Exchange on October 2015. There was chatter about raising the initial offering, but ultimately it was decided against it since Ferrari didn’t want to be perceived as greedy. This means the company, which was founded on September 13, 1939, in Modena Italy as “Auto Avio Construzioni,” by Enzo Ferrari, was valued at $9.8 billion.

Several Ferraris were parked outside the New York Stock Exchange when the IPO launched to commemorate the day. These weren’t cars stock brokers owned, no they were cars the Italian luxury sports car manufacturer displayed on Wall Street to celebrate an incredible achievement.

Take a look for yourself here.

Bloomberg anticipated the $52 per share cost would jump since the demand for the shares greatly exceeded supply. Many treated the IPO as a luxury stock, not stock owned in a car company.  Sergio Marchionne himself (Former CEO of Ferrari) stated “the company should be judged as a maker of luxury goods, which trade on much higher stock market multiples than carmakers.”

Looks like Bloomberg was right. Shares have doubled since its initial launch. Here’s a snapshot of Ferrari’s IPO year-to-date:

 

As you can see, the price per share hovered in the $50- $80 range during 2015 – 20016 but jumped up to $100+ in mid-2017. It peaked in June 2018 at $148.90 and is trading today at about $110.

The high demand for Ferrari shares may lessen over time since the additional stock will be distributed among FCA shareholders and Ferrari’s growth prospects are limited. Ferrari has only produced a little over 200,000 cars, since its inception, adhering to its strict exclusivity rule. Until recently, only 7,000 vehicles were produced each year. This number may go up over time, but it will most likely never exceed 10,000 sales per year so that it can maintain its exclusive flair. It’s currently targeting only 9,000 sales for 2019. Ferrari is planning “controlled growth in developed and emerging markets” and promises to “retain exclusivity as a core part of its strategic plan.”

Ferrari went public under the symbols RACE. Analysts predicted that the clever naming would attract investors who may have been on the fence about the Ferrari IPO.

In conclusion, it looks like filing for an IPO and going public was a good strategy for Ferrari.

Forza Ferrari!

SOURCES:

https://en.wikipedia.org/wiki/Ferrari

https://www.cnbc.com/2015/10/20/ferrari-ipo-prices-at-52share-within-range.html

https://www.fool.com/investing/general/2015/10/20/ferraris-ipo-what-you-need-to-know.aspx

https://mashable.com/2015/10/20/ferrari-prices-ipo/#uxB_YfebaZqk

https://www.ft.com/content/62a6e9d2-3127-11e5-8873-775ba7c2ea3d

https://www.freep.com/story/money/cars/chrysler/2015/07/29/montezemolo-ferrari-chairman-ipo-warning-fca-marchionne-fiat/30833819/

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