Tuesday, 13 October 2015

7 things to know about Ferari ahead of its IPO

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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