The Must-Know Facts from the Ferrari IPO Filing (NYSE: RACE)
By Diane Alter, Contributing Writer, Money Morning•
Ferrari (NYSE: RACE) will begin trading as public company on Wednesday, Oct. 21. The price range for the Ferrari IPO has been set at $48 to $52 a share.
According to the Ferrari IPO filing, the company aims to raise $860 million by offering 17.2 million shares. At the high end of the price range, the Ferrari IPO valuation would be $9.8 billion. That valuation is a hefty 33 times larger than the luxury automaker's total 2014 earnings.
Because of its "luxury" brand, Ferrari Chairman Sergio Marchionne has said Ferrari is worth at least 10 billion euros ($11.4 billion). And he wants Ferrari to be priced as a high-flying luxury goods stock.
Like many luxury brands, Ferrari appears recession proof. During the 2008 Great Recession, Ferrari booked only a modest 5% drop in cars sold.
But not every analyst is on board with that huge valuation. According to CNBC, many on Wall Street think Ferrari is worth about half of Marchionne's estimates.
The Italian company has shown solid growth in part because it doesn't just sell its signature cars. It also manufactures Maserati engines and licenses its brands for a variety of items. Both are key to sales and helped revenue climb in 2013 despite lower car shipments.
Here's what the Ferrari IPO filing with the U.S. Securities and Exchange Commission tells investors.
The Biggest Ferrari IPO Filing Details to Know
Ferrari deems itself a luxury car company. The word "luxury" appears 151 times in its IPO filing.
Some 57% of Ferrari's non-current assets - a company's long-term investment or materials - consists of brand value. This comes from the value of the Ferrari name, copyrights patents, and intellectual property. These are intangible assets and have no physical value.
While profitable, Ferrari rebranded in order to make up for slow revenue growth. From 2012 to 2013, the company's revenue increased a modest 5% to 2.3 billion euros ($3.2 billion). Although it limits annual sales at 7,000 units, it came in short at 6,922 cars in 2013.
The company notes the 7,000 car cap allows it to "focus on maintaining low volumes and exclusivity," yet it "limits our potential sales growth and profitability."
Ferrari earned 265 million euros in 2014, a 7.7% increase year over year, as it shipped 7,255 cars. The filing said net profit was 65 million euros in Q1 2015, a 20% increase YOY. Car shipments, meanwhile, were 1,635. That was down 5.6% YOY.
Compared to last year's first quarter, more cars in Q1 2015 were shipped to the UK and the Asia-Pacific region, including China. Most of Europe and Middle East saw a drop-off. Revenue for the quarter was flat at 621 million euros.
Ferrari expects to report revenue of about 720 million to 730 million euros for the three months ended Sept. 30. That would be an increase of 9% to 10% from a year earlier. Adjusted earnings is expected to rise 19% to 22% to between 210 million to 215 million euros.
Ferrari's float includes a loyalty share scheme for long-term investors, aimed at tightening the hold on the company by Fiat's founding Agnelli family. The Agnellis, via their holding company Exor, and Piero Ferrari together could end up with a voting power of around 50%, enabling them to thwart any unwanted takeover bid.Exor would hold about 36% of the voting power, Piero Ferrari would have about 15%, and public shareholders would hold about 49%. Exor, in particular, "will have significant influence over us," the filing says.
The Ferrari Formula One team is the oldest and most successful team in the history of the sport, with 222 Grand Prix won.However, the team could also prove to be a problem. One of the filing's risk factors notes that Ferrari's image and the company's financial results could be affected by poor performances from the Ferrari Formula One team, which last season didn't score a single win.
Ferrari owners are a loyal, passionate bunch. In 2014, about 60% of the new cars the company sold were to Ferrari owners. About one-third of Ferrari owners own more than one.