Get Ready for Ferrari’s IPO

Despite news in the auto industry have been recently filled with Volkswagen’s pollution software scandal, Ferrari is gearing up for a soon to be IPO on the New York Stock Exchange.

The Italian luxury sport car manufacturer owned by Fiat Chrysler Automobiles filed for a prospectus in July offering a market valuation that could be as high as $10.93 billion. Although no other specific detail about the deal has been revealed, Fiat’s CEO, Sergio Marchionne, declared Ferrari will offer up to 10% of its ownership to the market. Ferrari’s ownership is currently divided between 90% to Fiat’ shareholders and 10% to Ferrari’s Vice Chairman, Piero Ferrari; so far, as much as 10% from the total shareholder ownership may be offered to the public.

In terms Ferrari’s performance, it earned 265 million euros in 2014 from 7,225 cars in revenue, which strengthened 7.7% from the previous year, and translates to an increase of net income by 11%. Even after its IPO, Ferrari will still maintain its production of high luxury cards while Fiat will focus on market and commercial vehicles.

All in all, I do feel that Ferrari’s decision to IPO is sound. If the company has the capability to stand alone while offering substantially different product from its parent company, it should spin off and grow at its own pace. It would be also interesting to see what kind of revenue boosting or cost cutting value this spin-off can add to the luxury car manufacturer.

Yue Song