Supercar maker Ferrari achieved a top-of-the range stock market valuation as its shares were priced at $52 each, giving it a market capitalisation of $9.8bn. The company filed for an Initial Public Offering (IPO) in July and will begin trading on the New York Stock Exchange on Wednesday under the stock ticker RACE, in one of the most highly anticipated public offerings of the past 12 months.
Traders expect an early starting-grid scramble among investors with a penchant for trophy assets, as a very limited amount of stock will be available on the open market. Fiat Chrysler, its parent company, is selling only 10 per cent of the shares, 17.2 million in total, with a further 80 per cent to be transferred to its shareholders in tranches. Piero Lardi Ferrari, the only son of Enzo Ferrari, who founded the company in 1929, will retain a 10 per cent stake. At the top of Ferrari’s $48-$52 price range, the sale will raise about $893m for Fiat Chrysler. None of the sale proceeds will go to the newly listed company.
Pricing the stock at the top of its range is a triumph for Sergio Marchionne, Fiat Chrysler’s often controversial and always bullish chief executive. Mr Marchionne has vowed to implement a five-year plan aimed at doubling sales of its remaining brands, including Alfa Romeo and Jeep. The sale of Ferrari is aimed at producing some of the capital required to bring those plans to fruition.
The sale of the premium Formula One marque has been one of the most hotly anticipated of the year – as proven by the pre-sale roadshow which attracted far more potential investors than even Ferrari anticipated as it travelled to New York, Milan and London. By the standards of most recent high-profile IPOs, Ferrari also has a long and successful history to back its valuation.
The company is profitable, and despite its attempts to restrict production numbers it has also benefited greatly from the explosion in private wealth in emerging economies. Few grown-up toys say “I’ve made it” quite like the prancing horse.
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However, not all investors are convinced that buying a piece of the stock is quite the same as buying one of its cars. “For my money its valuation is too rich,” said one investment manager who declined to be named. “Ferrari is low-growth by design. The IPO is over-hyped and that much debt on the books [Ferrari has about €2.3bn (£1.7bn) of debt] should give everyone pause for thought.” Even at the lower end of the price range, Ferrari would have traded at a significant premium to its listed car-manufacturing peers – approaching 33 times forecast 2016 earnings.
Luxury brands have been one of the major beneficiaries of the six-year bull-run on equities, meaning Ferrari has arguably enjoyed a better streak in the showroom than on the track. However, the recent history of high-profile IPOs has not been particularly happy. An initial burst of interest in stocks such as Etsy, Twitter and Alibaba has, in each case, been followed by a harsh dose of reality.
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