Ferrari IPO Roadshow Could Start as Early as Friday
When can investors expect a Ferrari IPO? According to reports by CNBC and auto industry news outlets, Fiat Chrysler Automobiles N.V. (NYSE:FCAU) could launch its “roadshow” ahead of the eagerly awaited initial public offering of its Ferrari brand as early Friday, October 2, 2015. The legendary maker of scarlet racing cars is expected to go public later this month. Analysts expect the division to be valued at up to $12.0 billion. (Source: Ferrari IPO to launch as early as Friday: Sources, CNBC, September 29, 2015.)
Is a Ferrari IPO in the Works?
Ferrari’s acting CEO, Sergio Marchionne, who also heads Fiat Chrysler, said that for technical reasons, the IPO could not take place before October 12th. At least a year must pass since the merger giving birth to Fiat Chrysler for the Ferrari IPO to be released. UBS, Merrill Lynch, and Banco Santander will manage the offer. BNP-Paribas, Mediobanca, JPMorgan and Allen & Co are also involved.
Ferrari registered its upcoming IPO with the SEC last July 23rd. The rumors come as the U.S. authority for road safety, the NHTSA, has been investigating FCA over “apparent discrepancies” in the company’s reporting of safety complaints for a given period. Fiat Chrysler was imposed a fine of $105 million in July for deficiencies in recalling vehicles, including older Jeep models. FCA “takes this issue seriously and will continue to cooperate with the NHTSA to resolve it and make sure it does not happen again,” said the company in a statement. (Source: Fiat Chrysler reveals problems with U.S. safety reporting, The Globe & Mail, September 29, 2015.)
The next few days heading toward the Ferrari IPO date will also be decisive for the success of Fiat Chrysler’s new labor agreement with the United Auto Workers (UAW). The accord has met some resistance in receiving approval in some plants but the UAW expects the agreement to be approved in the larger factories shortly.
Meanwhile, shares of Fiat Chrysler, which controls the Ferrari brand, rose 8.9% in New York today, closing at $13.21. Its 52-week high is $16.72—evidently getting a power boost from Ferrari’s forthcoming Wall Street debut.
Why is Fiat Chrysler Floating Ferrari?
FCA’s decision to float Ferrari (in actuality only about 10% of the company) on the New York stock exchange is read in a dual perspective. An IPO on Wall Street will give prominence and visibility in a move that will give market visibility to one of the most popular “Made in Italy” symbols.
Clearly, Wall Street offers an ideal international stage. Even more, FCA is relying on the United States for success. After all, German luxury brands BMW and Porsche have grown thanks to their relentless efforts to exploit American demand and ease of ownership for luxury cars. More strategically, the Ferrari listing is another weapon in Marchionne’s strategic arsenal to go after an FCA-led merger with General Motors Company (NYSE:GM), giving rise to a new global giant of the automobile industry.
The decision to list Ferrari is rooted in financial logic. It is a spinoff, and only a relative one, that will create a company possessing solid industrial and business fundamentals, which will ensure a significant economic return.
Marchionne’s expectations of raising $10.0 billion or more are realistic and will give FCA the kind of liquidity it needs at the key moment in which it is reviving FCA in a phase of unprecedented growth with several new models in the pipeline.
Could Anything Trip Up This Ferrari IPO?
If there is a cloud, it comes from Germany. The idyllic premise of the Ferrari IPO has been compromised by the Volkswagen AG (NASDAQ:VLKAY) emission test scandal, whose effects have not fully been understood—though they can’t be good. Therefore, the fallout from Volkswagen could affect Ferrari’s IPO, even if shares of the former rose slightly in the past few days.
In the period from July 2014 to July 2015, the Fiat Chrysler group sold 12% more cars in Europe alone. (Source: European car market positive in July 2015, Al Volante, August 21, 2015.) It is a phenomenon, and Fiat should survive the VW crisis in full health. Indeed, the FCA Group stands to gain the most. In production terms, by the end of 2015, the group will have produced 650,000 cars—up 45% from the 400,000 cars produced in Italy in 2014.
Marchionne’s goal of reaching one million cars in 2016 seems realistic at these rates, becoming all the more plausible because of the Volkswagen emission scandal, which will leave many of the German company’s customers looking for alternatives in the diesel market. The Ferrari IPO is a key element in generating customer appeal across the whole FCA brand and product range to the benefit of Fiat Chrysler stock.