Luxury car maker Ferrari is expected to price its initial public
offering next Monday after setting the price range on Friday, in a deal first
announced in July to list about 10% of its shares on the New York Stock
Exchange.
The company said it will price the shares at $48 to $52 to raise nearly $1 billion.
Italian-American car maker Fiat Chrysler Automobiles FCA, +0.87% owns 90% of Ferrari. The
rest is owned by Piero Ferrari, the son of the company’s founder.
The deal is part of a series of transactions intended to fully separate
Ferrari from FCA, which plans to transfer its remaining 80% stake in the
company to its own shareholders, according to the IPO prospectus. The company
will not receive any of the proceeds, as all of the shares are being sold by
FCA.
UBS is acting as global coordinator and joint bookrunner, along with
Bank of America Merrill Lynch and Santander Investment Securities.
Here are seven things to know about Ferrari ahead of its IPO:
It’s highly dependent on its Formula 1 team, collectors and enthusiasts
Ferrari is highly exposed to the success of its Formula 1 racing team,
which it uses to promote the brand in lieu of the kind of mainstream
advertising that would likely dilute it. The team, called Scuderia Ferrari, has
won 222 Grand Prix races, 16 Constructor World titles and 15 Drivers’ World
titles, making it the most successful in Formula 1 history, according to the
prospectus. Formula 1 attracts about 425 million television viewers around the
world, making it one of the most watched sports events of the year. The
research and development that goes into designing, engineering and producing
circuit racing cars allows Ferrari to streamline all its new car design and
development, including special series, limited edition and one-off cars, which
can be sold at big premiums.
“If we are unable to attract and retain the necessary talent to succeed
in international competitions or devote the capital necessary to fund
successful racing activities, the value of the Ferrari brand and the appeal of
our cars and other luxury goods may suffer,” said the prospectus.
A low volume strategy may limit profit
Ferrari’s clients are drawn to its products in large part because of
their exclusivity, which the company retains by limiting the number of cars and
models it produces. The company deliberately maintains waiting lists to combine
the ideas of luxury and rarity with customer service, which also supports its
pricing model.
‘While important to our current marketing strategy, our focus on
maintaining low volumes and exclusivity limits our potential sales growth and
profitability.’Ferrari prospectus
The company booked a profit of 265 million euros in 2014, on revenue of
€2.76 billion. It shipped 7,255 cars in that year. That compares with the
36,500 cars sold by rival Maserati worldwide last year, or the 120,000 that
Porsche sold between January and August of 2014.
Source: Marketwatch,com
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