Ferrari is expected to soon debut its initial public offering (IPO). The premium car company has already chosen to be listed with the ticker RACE on the New York Stock Exchange (NYSE).
Fiat Chrysler Automobile, Ferrari’s parent company, will soon offer the company’s shares to be publicly traded. The final date for the IPO debut hasn’t been finalized, but you could soon buy yourself a Ferrari or its shares at the least in the next few months.
Fiat Chrysler Automobiles NV isn’t listing all the shares of Ferrari, as the company is far too valuable. Instead, the parent company is planning to sell only 9 percent of its stake in Ferrari. From a financial perspective, the sale will consist of 17.2 million shares of Dutch holding company Ferrari NV, according to a filing Friday with the U.S. Securities and Exchange Commission.
The shares are expected to be valued from anywhere between $48 and $52. Piero Ferrari, the son of the founder, is expected to retain his 10 percent stake in the company. With the IPO, the company hopes to raise $1 billion from investors that will be used to lighten the debt load of the parent company and finance its $54.5 billion investment program.
Ferrari reported $3.3 billion (2.8 billion euros) in sales last year. Though the sales numbers are high, the company made just $302 million in profit. This variation can be attributed to the fact that Ferrari makes far fewer cars than other mass-market companies.
Considering the 9 percent stake in Ferrari that is being listed, the Italian supercar manufacturer could be valued at $9.82 billion, depending on how the market responds. If an overallotment of shares to underwriters is taken into consideration, as much as 10 percent of Ferrari could be up for grabs and could raise the valuation to a smidgen below $10 billion, reported MSN. Apart from the IPO, Ferrari is expected to lighten its parent company’s debt load too, indicated the filing. Over the course of the next few months, Ferrari will take on $2.8 billion in debt and issue $2.12 billion in debt to third parties, thereby allowing its parent company a subsequent breather in this tough market.
Industry experts predict that Ferrari shares won’t just be lapped up. They could be oversubscribed as well, leading to an even higher valuation than estimated. People familiar with the matter indicated that buyers have remained unperturbed by the huge scandal surrounding Volkswagen AG. The German car maker had admitted that it deliberately rigged its diesel cars so that they passed the emissions control test. In the real world, the cars spewed a lot more carbon than they should have.
However, Ferrari has always remained aloof from making mass-market cars and has even confirmed that it won’t be getting into the production of sport utility vehicles or electric autos. Ferrari CEO Amedeo Felisa confirmed late last month that powerful vehicles with traditional growling engines are part of what customers pay for and, as a result, the company will stick to producing high-end sports cars only.
Incidentally, Ferrari has always kept the supply woefully lower than the demand. The company has been forcing a lot of customers with deep pockets to wait for a long time before they could get into their own car. Surprisingly, this strategy has worked wonders for Ferrari, and despite many other companies making equally powerful cars, Ferrari has remained the most preferred brand for high-end sports cars.
Interestingly, the Maranello, Italy-based manufacturer revealed in the filing that it plans to slightly increase production capacity to 9,000 by 2019. Earlier, the company made just 7,000 cars but slightly expanded the production to 7,255 to ensure the waiting list didn’t get too long, reported CNN.
Interestingly, Ferrari isn’t the one to primarily benefit from the IPO, but its parent company surely will.
[Image Credit | Mark Thompson, Andrey Rudakov / Getty Images]