Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Europe To Open Higher As Investors Focus On Ferrari IPO

Published 21/10/2015, 07:13
Updated 03/08/2021, 16:15

It’s been a difficult year for IPO’s particularly in the last few months where we’ve seen a number of deals pulled at the last minute; due to high levels of market volatility, so to be launching an IPO now could be construed as rather risky.

That being said it’s not often that we get an IPO that has the potential to generate a lot of excitement but very occasionally you get one that does, particularly amongst the guys here on the trading floor, as well as with petrol heads across the globe.

Today could be a case in point and even the ticker is appropriate as Fiat (L:0QXR)-Chrysler fires the starting gun on an IPO that could get a few pulses racing not only on Wall Street, but also across the City of London.

Later this afternoon Ferrari (N:RACE) will start trading on the NYSE under the rather apt ticker of RACE. See what I did there?

By way of a bit of background, 46 years ago in 1969 Fiat-Chrysler bought a 50% stake in Ferrari which it then increased to 90% in 1988. The company hopes to sell 9% of that stake, which amounts to around 17.2m shares on the open market at $52 a share, at the top end of the price range, which would value the company in the region of $10bn and raise about $895m.

Fiat said the sale is designed to distinguish the brand apart from its more mass market counterparts, and fund investment in the mainstream company’s growth plans, which means the cash raised won’t be going back into the newly floated company.

This could be a problem, and while the appeal of owning a piece of such a marque or luxury brand has its obvious attractions, which explains why the IPO is oversubscribed, one can’t help feeling what the advantages of owning the shares would be to a potential investor? Trading as it does at 33 times earnings the valuation seems rather high, given that car sales volumes are limited by exclusivity, unless there are certain privileges involved in being a shareholder like VIP access to the F1 paddock perhaps?

When one thinks of luxury marque brands the names of Rolls Royce (L:RR) Cars, Bentley, Bugatti, Lamborghini, Maybach and Aston Martin all trip off the tongue and all of these are subsidiaries of major car companies, Bay.Motoren Werke (L:0O0U), Volkswagen (DE:VOWG) Audi, Daimler and Ford Motor Company (N:F), where the brand doesn’t have to necessarily stand on its own two feet.

Even so one can’t help feeling that Fiat are surely missing a trick in not having a dual listing in Europe, particularly given how fanatical the “tifosi” are about the “Prancing Horse” brand.

One company that might be more than an interested party in the success of this particular IPO is Volkswagen. If their problems get any worse they could find themselves having to do something similar to Fiat and look at potentially offloading Bentley, Bugatti or Lamborghini, particularly if the Ferrari float goes well.

Ferrari shares should start trading at the New York open today, October 21st

The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person

Original Post

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.