Ferrari Races Ahead On Wall Street

Ferrari Chief Executive Amedeo Felisa and Chairman Sergio Marchionne were at the New York Stock Exchange to ring the opening bell, along with the company founder’s son Piero Ferrari and FCA Chairman John Elkann, whose Agnelli family will become Ferrari’s top investor on the planned distribution of the rest of FCA’s stake in Ferrari among its own shareholders next year.

Marchionne, who is also FCA’s chief executive, has sought to position Ferrari as a luxury goods business to win the high-flying trading multiples of companies such as Hermes and Prada.

But some analysts questioned whether the small-volume, capital-intensive carmaker will be able to sustain the high valuations beyond its racy market debut.

Proceeds from the offering will help to fund FCA’s turnaround plan, centred on revamping its Alfa Romeo, Jeep and Maserati brands in an attempt to boost sales to 7 million cars by 2018 and compete with premium segment rivals BMW and Volkswagen-owned Audi.

Share Price Boost
The pledge to distribute FCA’s remaining 80 percent stake in Ferrari among FCA shareholders has helped to lift the group’s shares by more than 80 percent over the past year and FCA will raise more than $4 billion from the offering and subsequent spin-off. The remaining 10 percent is held by Piero Ferrari, who will keep his stake.

The focus, however, will eventually turn back to FCA’s operational challenges, including high debt, ambitious sales goals and persistent weakness in its key Latin American market - only partially offset by a recovering European car market, firmer margins and well-received new models.

“We still believe that the current share price overstates the fair value of the company,” said Commerzbank analyst Sascha Gommel, who has a “sell” rating on FCA.

“We expect a significant de-rating the moment the Ferrari spin-off happens.”

Once Ferrari’s separation is complete, analysts expect Marchionne to pick up his campaign to merge with a rival, with his preferred partner likely to be General Motors after previous calls for a tie-up fell on deaf ears.

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“Upside in FCA in recent years has come more from M&A than from operational management, but the story is not finished yet,” one Milan-based fund manager said. “Marchionne has a plan, be it pursuing GM or possible asset sales.”

Speaking to broadcaster CNBC today, Marchionne said there was a great chance that car industry consolidation would happen over the next two years to deal with prohibitive costs of building cleaner and more intelligent vehicles.

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