Ferrari’s initial public offering priced at the top of expectations, showing investors are willing to pay up for a company with a strong brand. The deal was seen as a victory for Fiat Chrysler Automobiles NV Chief Executive Sergio Marchionne, but wasn’t necessarily indicative of a resurgence of strength in the broader IPO market, investors said. In recent weeks the IPO market has appeared to cool, with some brand-name deals postponing their offerings and others pricing or trading below expectations.
Ferrari on Tuesday priced shares in its initial public offering at $52 a share, the top end of a previously announced range, valuing the luxury car maker at $9.8 billion, according to people familiar with the deal.
Fiat Chrysler, which sold about 10% of Ferrari in the IPO, raised $893 million by selling around 17.2 million shares, the people said. The total amount raised doesn’t include the so-called overallotment option, which gives underwriters the opportunity to sell additional shares under certain circumstances.
Fiat planned to sell shares at a range between $48 and $52, according to a regulatory filing. The stock is set to begin trading on the New York Stock Exchange on Wednesday under the symbol “RACE.”
“Ferrari is a complete outlier. It’s a really sexy story,” said David Klaskin, chief investment officer at Oak Ridge Investments. “I don’t think people are scrutinizing it to the same degree as they would a less exciting story.”
With only about 10% of Ferrari publicly traded, many investors are expecting the stock to be supported initially by its scarce availability.
At the beginning of next year, Fiat Chrysler plans to spin off to its shareholders the other 80% it owns in Ferrari. At that point, Italy’s Agnelli family that controls Fiat Chrysler will own about 23% of Ferrari with about two-thirds of the stock publicly traded. Piero Ferrari, son of the company’s founder, owns the remaining 10%.
Determining Ferrari’s value has been debated by analysts and investors since Mr. Marchionne first suggested in May of last year that the luxury sports car maker could be worth $13.5 billion. Right after he made that pronouncement, many analysts put the value of Ferrari at between $5 billion and $7 billion. Though the $9.8 billion valuation is well above initial independent estimates, it is about a third below what Mr. Marchionne was pushing for at the outset.
During its roadshow, Mr. Marchionne didn’t pitch Ferrari to investors as an auto maker, but rather as a luxury brand, more akin to the highly sought-after Birkin handbag by designer Hermès or a luxury cashmere sweater by Italian apparel company Brunello Cucinelli, according to people familiar with the offering.
Some investment analysts have pushed back on the concept of pricing Ferrari as richly as a luxury retailer, however, noting that the amount that must be invested to develop a new car far outstrips what Hermès and its competitors invest to bring new products to market. While Ferrari has an operating profit margin of 14% that is the envy of other car companies, it is below most luxury fashion companies.
Mr. Marchionne made his pitch to investors on a flashy roadshow that included stops in New York, London and Ferrari’s historic headquarters in Maranello, Italy.
The offering stirred up interest not only from mutual funds and hedge funds, according to people familiar with the deal, but also individual investors eager to buy shares in one of the world’s most recognized brands, which has become famous in part to decades of success in Formula One racing.
Martin Van Amerongen, a 31-year old day-trader based in Detroit, is hoping to buy as many as 2,500 shares of Ferrari when trading begins on Wednesday, with his ideal price in the mid-$50s.
“Ferrari is a perfect cocktail of everything that’s good for an IPO,” said Mr. Van Amerongen, who doesn’t own a Ferrari but says he wishes he did. “It has a certain prestige. It’s such a staple in the luxury-goods market, and no matter what kind of economy we’re in there’s always people buying luxury goods.”
By Corrie Driebusch firstname.lastname@example.org and Eric Sylvers email@example.com Courtesy The Wall Street Journal