Ferrari Spin-off

Exciting news for the automobile enthusiasts as the auto industry is changing significantly. Anyone will be able to park a Ferrari in their stock portfolio in the near future, as Fiat Chrysler is spinning off the Italian luxury sports car maker. The Ferrari stocks are going to be listed in New York and perhaps in Europe. The structure of the spin-off has 80% of the outstanding Ferrari shares go to existing Fiat Chrysler Automobiles (FCAU) shareholders, and the 20% will be publicly offered. Total worth of the company would range from $7.59 billion to $12.65 billion dollars and the initial public offering may take place sometime next year. With roughly 25%, the largest shareholder will be the prominent Italian industrialist John Elkann and his family, out of all the FCA owners. It is highly probably that Elkann will try to transform Ferrari into the leader of Italian luxury cars as he might absorb F.C.A.'s Maserati and Alfa Romeo. The NYSE FCAU stock has been soaring after the spin-off announcement and has increased 12.35% to $10.92. The main reason of the split is because Ferrari started becoming irrelevant to the company, as Fiat acquired Chrysler and was therefore predominately focused on the mass-market. In addition, the auto industry as a whole has been having a tough time in the emerging markets such as Brazil and Russia, in the recession-tormented Europe, and the heavy profit-regulated US and China. This ambitious spinoff would bring around $1 billion dollars in financing to the company, in addition to the $2.5 billion dollars in convertible debt issued by F.C.A. this past Wednesday. CEO Sergio Marchionne who has orchestrated these deals is on a risky quest to unlock more value for the firm. History is on his side, as he completely turned around problematic Fiat to success, and managed the 100% acquisition of Chrysler, which he also turned from bankruptcy to profitability. Despite not being a known name in the field, Marchionne was appointed CEO a decade ago by Elkann and has proved to be a skilled leader. What is left for us to see is if his "2014-2018 business plan" with the separated FCA and Ferrari will maximize the value of all the businesses or end up damaging historic brands.

-Dimitri Theocharis