Luxury automaker Ferrari will go public Wednesday, offering investors a chance to buy shares in the iconic brand and giving Fiat Chrysler Automobiles NV cash to help finance its ambitious five-year growth plan.
Fiat Chrysler on Tuesday priced the initial public offering for its luxury unit Ferrari at $52 a share — at the top of the range — raising about $900 million ahead of the start of trading on the New York Stock Exchange.
The price values Ferrari NV at about $10 billion. Fiat Chrysler will use proceeds from the sale to help fund its nearly $60 billion plan to dramatically boost sales. Demand for the iconic brand among large institutional investors, who get first crack at it, was oversubscribed.
FCA CEO Sergio Marchionne, who is chairman of Ferrari, will be in New York for the start of trading Wednesday along with John Elkann, who leads Exor SpA, the investment firm that owns a controlling stake in Fiat Chrysler.
Elkann and Marchionne will ring the opening bell at the stock exchange Wednesday. A long line of Ferraris will be on display outside the stock exchange.
Fiat Chrysler is selling a 9 percent stake in Ferrari — or about 17.2 million shares. Shareholders in Ferrari and Fiat Chrysler shareholders will get 80 percent of the remaining shares when the spinoff is completed next year. The company will sell another 1 percentage point stake, or 1.7 million shares, if there is enough demand. The other 10 percent is owned by Pietro Ferrari, the son of the company’s founder.
Fiat Chrysler shareholders eventually will get one share in Ferrari for every 10 shares of Fiat Chrysler they hold. Exor will own nearly a quarter of the company after the sale. Exor and Pietro Ferrari — using a loyalty stock program — will hold nearly half of the voting rights shares in the company after the IPO.
Ferrari’s CEO is Amedeo Felisa, who has 40 years of experience in the auto industry. The stock will trade under the “RACE” symbol. The company’s North American headquarters is in Englewood Cliffs, New Jersey.
Last year, Marchionne unveiled a five-year plan, $60 billion to increase sales by 1 million to 3.1 million by 2018 in North America. In total, Fiat Chrysler vows to increase sales to 7 million worldwide — up about 2.5 million over the current 4.4 million. It’s not clear how exactly Fiat Chrysler will net from the spinoff of Ferrari.
In contrast, Ferrari in 2014 sold just 7,255 cars with revenue of $3.1 billion and net profit of $300 million and profit margins of 25.1 percent, far above the margins of mass-market automakers. The company expects to modestly boost production to about 9,000 a year by 2019.
Ferrari sells nine models, including seven sports cars -- 458 Italia, 488 GTB, 458 Spider, 488 Spider, F12berlinetta 458 Speciale and 458 Speciale A -- and two GT cars, California T and FF. Many of those will be on display on Wall Street on Wednesday. It also produces a limited-edition supercar, LaFerrari, and very limited-edition series.
The spinoff will benefit Ferrari in terms of U.S. fuel economy and greenhouse gas emission regulations. As a small automaker, it will face less stringent regulations. But Ferrari may not even be able to meet those.
The automaker has petitioned EPA for “alternative standards for the 2017-2019 period, which are aligned to our technical and economic capabilities, and we expect to receive feedback on this proposal by the end of 2015.” After the spinoff, it will ask NHTSA to recognize it as an independent manufacturer of less than 10,000 vehicles globally to meet less stringent rules.
Ferrari, founded in 1929 by Italian sports driver Enzo Ferrari, is one of the world’s best-known luxury brands. The automaker’s Formula 1 racing team, Scuderia Ferrari, is the most successful team in Formula 1 history, winning 224 Grand Prix races, 16 Constructor World titles and 15 Drivers’ World titles.
“We believe our history of excellence, technological innovation and defining style transcends the automotive industry, and is the foundation of the Ferrari brand and image. We design, engineer and produce our cars in Maranello, Italy, and sell them in over 60 markets worldwide through a network of 182 authorized dealers operating 204 points of sale,” the company said in its offering.
The company purposely sells fewer cars than there is demand “as part of our strategy to manage waiting lists and maintain product exclusivity.”
The U.S. accounts for more than 30 percent of Ferrari global sales. Special limited-edition vehicles routinely sell for $1.1 million or more. Ferrari allows the extensive personalization of vehicles — before they are built — which typically adds 15 percent to the purchase price, the company said.
Ferrari says it “promotes hard-to-satisfy demand and thus scarcity value in our cars.” It rewards loyal owners through driving events in Italy and at auto shows and “provides “our most loyal and active clients with preferential access to our newest and highest value cars.”
As a result, in 2014 approximately 60 percent of new cars were sold to existing Ferrari owners and 34 percent of them own more than one Ferrari car. Ferrari even has a theme park, Ferrari World, in Abu Dhabi.
Much of Ferrari’s revenue comes from the sale of merchandise. It licenses the brand through a network of 20 franchised and 12 owned Ferrari stores. It may expand the Ferrari brand in new categories “including sportswear, watches, accessories, consumer electronics and theme parks which we believe enhance the brand experience of our loyal following of clients and Ferrari enthusiasts.”
Ferrari is based in the Netherlands for tax purposes. The automaker was incorporated an LLC in May 2013 under the name “New Business Netherlands NV.” It recently changed its name to Ferrari NV.
■Fiat Chrysler sold 17.1 million shares of Ferrari at $52 to investors Tuesday — or 9 percent of the automaker — raising $893 million and valuing the company at nearly $10 billion
■Trading will begin Wednesday on New York Stock Exchange under the “RACE” ticker symbol.
■Fiat Chrysler may sell another 1.7 million shares if demand warrants to the underwriters.
■Exor Spa and Pietro Ferrari will hold nearly half of voting rights stock
■Fiat Chrysler CEO Sergio Marchionne — as chairman of Ferrari — will ring the opening bell.