Fiat Chrysler Automobiles N.V. FCAU has initiated the initial public offering ("IPO") of its luxury sports car brand Ferrari. The shares will trade on the New York Stock Exchange (NYSE) under the ticker symbol ‘RACE’. Ferrari’s shares are expected to start trading on Oct 21.
Ferrari is an Italian luxury sports brand founded by Enzo Ferrari in 1929. It is renowned for producing high-performance sports cars.
Fiat Chrysler acquired a 50% stake in Ferrari in 1969 and increased its ownership to 90% by 1988. The company intends to sell around 9% of its stake in Ferrari, which amounts to 17.2 million shares. After the IPO, Fiat Chrysler will retain ownership of 80% of its shares. The automaker plans to distribute these shares among its shareholders early next year. Piero Lardi Ferrari, the son of Enzo Ferrari, will continue to retain the remaining 10% of the Ferrari ownership.
Fiat Chrysler plans to set the price for Ferrari’s IPO at $48–$52 per share. With this, the automaker expects total market capitalization of Ferrari to be about $9.8 billion. Fiat Chrysler will use the proceeds from this public offering to partly finance a five-year expansion strategy requiring $55 billion.
Sergio Marchionne, CEO of Fiat Chrysler, will continue to serve as the chairman of Ferrari. He thinks that Ferrari can expand globally. However, any increase in production will adversely affect the brand’s exclusivity. In order to maintain the high demand for its beautiful and exclusive cars, the company limits their production to 7,000 units per year.
However, to satisfy the rising demand for its vehicles, Ferrari delivered 7,255 cars last year. With this, it generated total revenue of $3.3 billion, with total profits of $302 million last year.
Ferrari plans to expand in developed and emerging markets by increasing its dealerships and expanding licensing agreements, backed by the exclusive nature of its vehicles. The company plans to foray into sportswear, watches, accessories, consumer electronics and theme parks as well.
Some stocks performing well in the automobile industry include Volkswagen AG VLKAY, Superior Industries International, Inc. SUP and Federal-Mogul Holdings Corporation FDML. All three stocks carry a Zacks Rank #2 (Buy).
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