At the end of June, the mass carmaker had net debt of $10.8 billion due to a combination of Fiat’s acquisition of Chrysler and ongoing lossmaking activities.
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Speaking of Fiat Chrysler, the European Union has ruled that the tax deals for Fiat and Starbucks (SBUX) in Luxembourg and the Netherlands are illegal. Shares of the company jumped 17% after the initial public offering. Piero Lardi Ferrari, the only son of Enzo Ferrari, who founded the company in 1929, will retain a 10 per cent stake.
Ferrari’s share sale, which has been in the works for about a year, is critical to help Fiat Chrysler finance a €48 billion investment program focused on expanding the Jeep, Alfa Romeo and Maserati nameplates globally. In its IPO prospectus, the company stated that demand outstrips supply for Ferraris, and it plans to keep it that way.
Ferrari’s CEO is Amedeo Felisa, who has 40 years of experience in the auto industry. The shares, which priced at $52, added $4.05 to $56.05. The company’s North American headquarters is in Englewood Cliffs, New Jersey.
Ouside on the street, crowds flocked to see eight of the supercars, including driver Sebastien Vettel’s F1 model, a 1961 model worth $15 million, and one of the hottest new models, the $1.4 million hybrid LaFerrari.
For Fiat Chrysler, which traded lower on Wednesday, the long-term effect of losing Ferrari are harder to pin down.
For the six-month period ended June 30, Ferrari reported revenue of $1.6 billion, up 3% from the year-earlier period, and a net profit of $140 million.
Ferrari gets top dollar for its cars. As a small automaker, it will face less stringent regulations.
This strategy has made the Ferrari brand one of the most valuable in the world. Now that shares have begun trading, investors need to be even more cautious.
“We believe our cars are the epitome of performance, luxury and styling”, it said.
In a sense, Ferrari’s IPO seems very much like its road cars; demand vastly outpaces availability. More than 12 million shares changed hands within the first half hour of trading, with the stock climbing to a high of $60.97 before retreating.
The main problem now is that investors have to decide how to value Ferrari.
The chance to buy shares may be tempting, though Ferrari fans may argue it’s not a patch on owning the vehicle itself. FCA owns 90 percent, which means its stake will be reduced to 80 percent after the IPO. It may expand the Ferrari brand in new categories “including sportswear, watches, accessories, consumer electronics and theme parks which we believe enhance the brand experience of our loyal following of clients and Ferrari enthusiasts”.
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Ferrari is based in the Netherlands for tax purposes.
