FERRARI AIMS FOR $10 BILLION

FERRARI HAS FILED IPO PAPERWORK WHICH VALUES THE COMPANY AT $10 BILLION




The company announced on Friday that it is offering 17,175,000 shares on the New York Stock
Exchange with a price range between $48 and $52 per share. If the market agrees the sale of
the shares - about nine percent of the company - would raise around $900 million. There is
the potential of an additional 1.7 million shares to be added to the sale and, if that happens,
the money raised will go up to $982 million. This money will be spent on reducing the debts that
have been incurred with the Fiat Chrysler turnaround plan, which aims to give the company sales of
7 million vehicles a year in 2018.



The key question that remains is how an independent Ferrari will operate, even if the shareholders
will be largely the same as before. There are going to be some problems, not
least because of the US emissions rules that requires companies to average
out the MPG figures across the range of their cars. Ferrari will either have to
produce much more fuel efficient machinery or it will need to produce new
models that will bring down the average.





There may also be pressure from the shareholders for the company
to generate more profits. At the moment the company has pegged its
production at 7,000 cars a year, but there appear to be plans to increase this
to 10,000 and it may be that the firm will follow the route that Porsche has
taken in recent years with profitable vehicles, such as SUVs. The fear is that this
will damage the exclusivity of the Ferrari brand.



The company does almost no advertising outside Formula 1 and it is believed that
the firm's firm programme is largely free, thanks to the payments that come in from its primary
sponsor Philip Morris International, from Shell and other sponsors, and from the Formula One group.





The company also earns considerable sums in merchandising and licensing. Ferrari is expected to
list under the ticker tape name RACE and the IPO will go ahead within the next fortnight. FCA boss
Sergio Marchionne believes that the Ferrari brand can be developed into the luxury goods markets
and thus should be able to use multiples far in excess of other car companies and more in line with
those seen in the luxury business. He may be right.