Fiat Chrysler just launched its Ferrari IPO

October 12, 2015, 8:23 AM EDT

Ferrari, known for its high-powered, highly-prized sports cars, now has a ticker symbol to match: RACE.

On Monday, Fiat Chrysler Automobiles, the world’s seventh largest carmaker, announced the launch of its Ferrari spinoff.

FCA said in a release that it plans to sell about 17 million common shares -- equal to a 9% stake -- of the Italian luxury car company. The shares will price at between $48 and $52, and they will trade under its RACE ticker on the New York Stock Exchange.

FCA is floating 10% of Ferrari; it’s offering a 9% share on the market and underwriters have an option for a 1% stake. After the sell-off, FCA will own 80% of Ferrari, which it plans to distribute to its shareholders early next year. The remaining 10% of the company belongs Piero Ferrari, the son of the Ferrari founder Enzo Ferrari.

The initial public offering is the first in a series of transactions aimed at separating Ferrari from FCA.

Fiat has owned part of Ferrari since 1969 when it bought a 50% stake in the carmaker. Fiat has been Chrysler’s parent since right after Chrysler’s bankruptcy and government bailout in 2009. Fiat officially took over Chrysler last year as the two companies merged into FCA.

7 things to know about Ferrari ahead of its IPO

Oct 12, 2015 8:42 a.m. ET

Luxury car maker Ferrari is expected to price its initial public offering next Monday after setting the price range on Friday, in a deal first announced in July to list about 10% of its shares on the New York Stock Exchange.

The company said it will price the shares at $48 to $52 to raise nearly $1 billion.

Italian-American car maker Fiat Chrysler Automobiles owns 90% of Ferrari. The rest is owned by Piero Ferrari, the son of the company’s founder.

The deal is part of a series of transactions intended to fully separate Ferrari from FCA, which plans to transfer its remaining 80% stake in the company to its own shareholders, according to the IPO prospectus. The company will not receive any of the proceeds, as all of the shares are being sold by FCA.

UBS is acting as global coordinator and joint bookrunner, along with Bank of America Merrill Lynch and Santander Investment Securities.

Here are seven things to know about Ferrari ahead of its IPO:

1) It’s highly dependent on its Formula 1 team, collectors and enthusiasts

Ferrari is highly exposed to the success of its Formula 1 racing team, which it uses to promote the brand in lieu of the kind of mainstream advertising that would likely dilute it. The team, called Scuderia Ferrari, has won 222 Grand Prix races, 16 Constructor World titles and 15 Drivers’ World titles, making it the most successful in Formula 1 history, according to the prospectus. Formula 1 attracts about 425 million television viewers around the world, making it one of the most watched sports events of the year. The research and development that goes into designing, engineering and producing circuit racing cars allows Ferrari to streamline all its new car design and development, including special series, limited edition and one-off cars, which can be sold at big premiums.

“If we are unable to attract and retain the necessary talent to succeed in international competitions or devote the capital necessary to fund successful racing activities, the value of the Ferrari brand and the appeal of our cars and other luxury goods may suffer,” said the prospectus.

2) A low volume strategy may limit profit

Ferrari’s clients are drawn to its products in large part because of their exclusivity, which the company retains by limiting the number of cars and models it produces. The company deliberately maintains waiting lists to combine the ideas of luxury and rarity with customer service, which also supports its pricing model.

The company booked a profit of 265 million euros in 2014, on revenue of €2.76 billion. It shipped 7,255 cars in that year. That compares with the 36,500 cars sold by rival Maserati worldwide last year, or the 120,000 that Porsche sold between January and August of 2014.

“While important to our current marketing strategy, our focus on maintaining low volumes and exclusivity limits our potential sales growth and profitability,” the prospectus cautioned.

3) Licensing is key

Ferrari’s prancing horse is a valuable asset to the luxury marque. From the Ferrari World theme park in Abu Dhabi to watches and sportswear, Ferrari brings in a considerable amount of net revenue through licensing agreements.

In the first three months of 2015, €109 million, or 17.6% of the auto maker’s net revenue, came from sponsorship, commercial and brand, which covers merchandising, licensing and royalty income, according to the prospectus. That is up from 16.3% for the same period in 2014. The numerous licensing partnerships, including Oakley sunglasses, Puma, Lego and Microsoft MSFT, -0.72% may expose Ferrari to additional risk should any of the partners perform adversely.

“While we select our licensing and franchising partners with care, any negative publicity surrounding such partners could have a negative effect on licensed products, the Ferrari stores and theme parks or the Ferrari brand,” it said.

4) Engine revenue is tied to Maserati

In 2011, Maserati, a fellow luxury brand in the Fiat Chrysler Automobiles group, contracted with Ferrari for an aggregate 160,000 engines through 2020, with the expectation of increasing that to an aggregate 275,000 through 2023. The agreement will not be affected by Ferrari’s spinoff from FCA.

However, though Maserati has plans for an expanded model range and sales volume, any decrease in the brand’s vehicle shipments would have a direct negative effect on Ferrari’s engine sales. Engine sales to Maserati generated €54 million in net revenue for the first three months of 2015, down from €62 million for the same period in 2014. Ferrari said the decrease was due to a 15% decline in the volume of engines sold to Maserati owing to reduced vehicle shipments.

Before 2015, net revenue from Maserati engine sales had increased steadily from 2012 to 2014. Overall engine sales accounted for 10.3% of net revenue for the first three months of 2015, according to the prospectus

5) It needs to win over clients in emerging markets

Ferrari’s growth strategy includes plans to expand into markets it believes have strong growth potential. These include a number of developing markets that are now home to many high-net-worth individuals, including China and other parts of Asia as well as the Middle East. However, the company has no operating experience in these markets, and it is unclear whether current economic-growth levels can be sustained. In some markets, mandatory government approvals and other regulatory restrictions could hamper growth, while tax changes or the discouragement of luxury purchases are further risks.

“If our international expansion plans are unsuccessful, our business, results of operation and financial condition could be materially adversely affected,” said the prospectus.

6) The small float may make share trading volatile

The IPO is of just 10% of the company, which means there will be a limited public float in the hands of a small number of shareholders. At the same time, FCA shareholders will own 80% of the rest of the company, and Piero Ferrari the final 10%. These factors combined may cause volatility in trading and block new shareholders from influencing management decision making.

7) A loyalty voting program may affect liquidity

Trading may be further crimped by the company’s loyalty voting program, which seeks to reward shareholders who are willing to hold their shares for at least three years with special voting shares. Special voting shares cannot be traded and are transferable only in limited circumstances.

“This loyalty voting program is designed to encourage a stable shareholder base and, conversely, it may deter trading by shareholders that may be interested in participating in our loyalty voting program. Therefore,” according to the prospectus, “the loyalty voting program may reduce liquidity in our common shares and adversely affect their trading price.”

Ferrari IPO Said to Be Oversubscribed Ahead of New York Listing

- Books closing Monday as final pricing expected late Tuesday
- Share sale values Ferrari at $12 billion including debt

Ferrari NV’s initial public offering is oversubscribed throughout its price range as investor interest in the supercar maker outstrips the shares available, people familiar with the matter said.

Investors had indicated to bankers last week before the sale began that demand would far exceed the available number of shares, and those predictions have been borne out, said the people, who asked not to be named because the process is private. The books close on Monday at 4 p.m. in all regions, two of the people said.

The share sale, which has been in the works for about a year, is critical to help Fiat Chrysler finance a 48 billion-euro ($54.6 billion) investment program focused on expanding the Jeep, Alfa Romeo and Maserati nameplates globally. Chairman Sergio Marchionne, also chief executive officer of parent Fiat Chrysler Automobiles NV, has taken both companies’ stories on the road in London, New York and Ferrari’s home in Maranello, Italy. Final pricing is expected late Tuesday, with trading due to start on Wednesday, the people said.

Ferrari plans to sell as many as 18.89 million shares, 10 percent of the company, at $48 to $52 each, according to an Oct. 9 filing with the U.S. Securities and Exchange Commission. The shares will trade on the New York Stock Exchange under the symbol RACE.

Fiat Chrysler is keeping the share volume in the IPO limited to ensure robust demand, just as Ferrari boosts its own product allure by capping the number of cars it makes. After the share sale, Fiat Chrysler then plans to distribute its remaining 80 percent Ferrari holding to its own investors early next year. Piero Ferrari, the son of the brand’s founder, will retain his 10 percent holding.

Ferrari Shares Slide to New Low After Analysts Initiate Coverage

Nov 16, 2015

Ferrari shares are rolling downhill Monday.

Shares of the luxury automaker are off 2.1% to $50.30, on track to close at their lowest level since debuting in October, after a batch of analysts initiated coverage on the stock almost a month after it went public.

There was something for every investor in the analyst notes with UBS initiating the stock with a “buy” rating, J.P. Morgan Chase & Co. rating the stock as “neutral” and Evercore ISI giving Ferrari a “sell” rating.

UBS, for one, is optimistic on the stock, expecting it to return to its opening debut price of $60 over the next 12 months. Analysts at J.P. Morgan and Evercore ISI are taking a more cautious view though.

J.P. Morgan said it sees “strong earnings growth medium term” for Ferrari, driven by increasing demand for its cars, the scaling back of racing-related research and development costs, the roll-off of costly currency hedges and the realization of lower commodity prices and savings on other manufacturing costs.

The bank said the latter three factors likely only represent one-time opportunities though and that it views the valuation as fair, which is why it rated the stock at neutral. J.P. Morgan gave shares a $52 price target, 3.4% above where they recently traded Monday.

Over at Evercore ISI, analysts wrote that Ferrari’s margins remain lower than its peers and that its products need updating and refreshing. Evercore gave shares a $40 price target, the lowest among all Ferrari analysts surveyed by FactSet.

The analyst initiations on Ferrari come 25 days after the company’s shares debuted in late October, the typical waiting period for analysts from firms that work on IPOs. J.P. Morgan and UBS were both underwriters on Ferrari’s deal.

KaloBios Soars 824% On Turing CEO's Big Stock Buy

KaloBios Pharmaceuticals skyrocketed 824% to 19.13 in after-hours action following news that Turing Pharmaceuticals CEO Martin Shkreli bought 1.2 million shares of KaloBios.

KaloBios had 4.1 million shares outstanding as of Aug. 7.

Shares were bought Monday-Tuesday at prices from 61 cents to $2.43. On Friday, KaloBios said it would wind down its operations and liquidate assets.

But after the Shkreli stock buy disclosure, KaloBios said an investor group led by Shkreli had acquired more than 50% of the stock and that company is in talks with Turing's CEO about KaloBios staying in operation

Shkreli gained notoriety recently by buying the rights to decades-old drug Daraprim, then hiking the price by 5,500%. That sparked political and regulatory outcry, as well scrutiny of drug pricing and other practices.

KaloBios Up As Much As 5,000% On Shkreli-Led Takeover

Three weeks have made a big difference for KaloBios Pharmaceuticals (NASDAQ:KBIO), whose stock since 2014 had fallen into a black hole amid struggles to get a single drug to the market.

On Nov. 5, KaloBios Pharmaceuticals said it would cut 17 employees from its staff, a 61% reduction. On Nov. 13, the company said it would liquidate its assets and halt operations. But six days later, the company announced that Martin Shkreli, the young, oft-maligned CEO of Turing Pharmaceuticals, would become its new CEO and that an investor group he led had bought 70% of KaloBios' outstanding shares.

The investor group will also invest at least $3 million in KaloBios and committed to a $10 million equity financing facility, the company said.

KaloBios' stock traded at around 90 cents a share on Nov. 13. On Nov. 19, it jumped 402% and continued into the stratosphere in the stock market today, up around 105% to levels not seen since last January. The range between the stock's Nov. 13 closing price and Monday's intraday high of 45.82 marked an increase of around 5,000%.

KaloBios was up 107% to 37.82 in afternoon trading.

The company began trading in 2013.

"So happy to rescue $KBIO from having to discontinue our promising blood cancer drug lenzilumab," Shkreli said Thursday on Twitter. "Let's hire the downsized employees back too!"

But given the difficulties faced by KaloBios, whose drugs have underperformed in trials and whose CEO announced his retirement from the company in January, Shkreli could face an uphill battle turning the company around.

Five-thousand percent has been a recurring figure in recent months for Shkreli. He, along with the broader pharmaceutical industry, became a lightning rod for criticism in September after Turing bought the 62-year-old drug Daraprim and quickly hiked the price by more than 5,000%.

Shkreli has argued the increase would fund research and development, and has since said the company would lower the price.

Turing names new CEO to replace Shkreli

Turing Pharmaceuticals on Friday appointed a new interim chief executive to replace the controversial Martin Shkreli, who resigned a day after he was arrested by the FBI amid a federal investigation involving his former hedge fund and a pharmaceutical company he previously headed.

Shkreli, who is still CEO of KaloBios Pharmaceuticals, was charged Thursday in a federal indictment related to his time managing hedge fund MSMB Capital Management and as CEO of biopharmaceutical company Retrophin. The 32-year-old entrepreneur this year became a lightning rod for controversy over soaring drug prices at Turing.

On Thursday, the U.S. attorney's office in Brooklyn, New York, unsealed an indictment against Shkreli, charging him with seven counts including conspiracy to commit securities fraud and conspiracy to commit wire fraud. U.S. Attorney Robert Capers alleged Shkreli used Retrophin to cover personal debts.

"As alleged in the indictment, Shkreli essentially ran his companies like a Ponzi scheme, where he used each subsequent company to pay off the defrauded investors in the prior company," Capers said.

Shkreli was released on a $5 million bond after a Thursday hearing, and had his travel restricted to parts of New York. He surrendered his passport and cannot contact MSMB or Retrophin employees.

Evan Greebel, whom the SEC said was Shkreli's lawyer, also faces a count of wire fraud conspiracy. He was arrested Thursday and released on a $1 million bail. Greebel's travel will also be restricted.

Both Shkreli and Greebel were sued in a related lawsuit by the U.S. Securities and Exchange Commission, which also named MSMB Capital as a defendant.

In a complaint made public Thursday, the SEC alleged that Shkreli engaged in "widespread fraudulent conduct" from at least October 2009 to March 2014.

During that time, the SEC complaint alleged, Shkreli "made material misrepresentations and omissions to investors and prospective investors," lied to one of MSMB's executing brokers about the firm's ability to settle short sales he had made, and misappropriated funds.

Additionally, the complaint alleged that once Shkreli took Retrophin public, he "fraudulently induced" the company to fund settlements with individuals who had claims against Shkreli from their investments in his hedge funds.

Specifically, the SEC alleged that Shkreli misappropriated about $120,000 in investor funds from MSMB; lied about the fund's performance, assets under management, and retention of an independent auditor and administrator; misrepresented a naked short to a broker; and misappropriated about $900,000 of investor funds from MSMB Healthcare to fund an arbitration settlement tied to the firm's failure to settle short sales.

The final allegation in the complaint is that Shkreli induced Retrophin to issue stock and cash to disgruntled hedge fund investors, falsely saying the payments were for consulting services.

MSMB Capital Management was founded in 2009, and Shkreli announced its closure in 2012. Retrophin was founded in 2012, and Shkreli was its CEO until the company fired him in September 2014.

Retrophin in August sued Shkreli in federal court in Manhattan for $65 million, claiming he had used his control over Retrophin to enrich himself and pay off claims of investors in MSMB, which he had also defrauded.

Ferrari's fourth-quarter profit plunges 44%

Ferrari NV Tuesday reported a steep drop in fourth-quarter net profit and gave a muted outlook for 2016, underlining the difficult road ahead for the super sports car maker as it looks to go it alone.

Ferrari said it earned a net profit of EUR55 million ($59.7 million) in the final three months of 2015, a 44% drop on the year. Sales fell 1% to EUR744 million. The numbers are slight adjustments to preliminary figures Ferrari released last week.

The company said it sees sales rising 1.6% this year. It will pay a dividend of EUR0.46 a share for a total payout of EUR87 million.

Ferrari whiffed on earnings and now the stock is getting crushed

Shares of luxury automaker Ferrari were getting demolished after the company posted disastrous quarterly earnings Tuesday morning.

In just its second quarter since going public, the company reported a profit decline of 30% versus the fourth quarter of last year.

Profit sunk to €55 million ($60 million) from €79 million ($86 million) in the same quarter last year. Revenues were slid to €744 million from €751 million the prior year.

Part of the problem is investors simply don't know what to make of Ferrari's sales. Rather than shooting for growing sales like a normal auto company, Ferrari purposely sells a small amount to retain exclusivity.

This is tough for investors to swallow and could make the stock volatile.

Ferrari Profit Rises on Revved-Up Production Line

Luxury car maker also benefits from lower Italian tax rate

Feb. 2, 2017

Ferrari NV Chief Executive Sergio Marchionne is making good on his promise to rev up production at the luxury sports-car maker, delivering improved sales and profit in the process during the company’s first year independent of Fiat Chrysler Automobiles NV.

Ferrari on Thursday reported a more than one-third jump in full-year profit partly on an increase in deliveries of its cars, which on average sell for about $250,000, though the price can be 10 times that for special limited-edition models. The company also benefited from a lower tax rate in the year.

Mr. Marchionne’s approach marks a shift at Ferrari whose prestige, as one of the world’s most recognizable brands, was built over decades partly by limiting production.

Mr. Marchionne first hinted at a production increase in May 2014, when he said Ferrari could sell 10,000 cars a year without damaging its standing as an exclusive car manufacturer. The company had been averaging about 7,000 cars a year.

Ferrari broke through the 7,000 barrier in 2014 and then started pushing the accelerator the following year to coincide with the company’s initial share sale on the New York Stock Exchange in October 2015. At the time of the IPO, Mr. Marchionne promised to reach 9,000 in 2019.

In 2016, Ferrari shipped 8,014 cars, a 5% increase on the previous year, with 8,400 units in its sights this year. Keeping volume growth at about that clip for the next three years would bring the company to the 2019 target.

Ferrari has gotten “phenomenal pressure” from the outside to build a sport-utility vehicle, Mr. Marchionne said on a call with analysts. The executive has long maintained that Ferrari will never build an SUV and Thursday said the company could hit 10,000 vehicles a year without resorting to an SUV.

“We have to be disciplined not to bastardize the brand,” Mr. Marchionne said.

For now, Ferrari hasn’t sacrificed its fat profit margins in increasing production. The company generates an operating profit margin that most other car makers only dream of, standing at 22% in the fourth quarter—some three times Fiat Chrysler’s margin in North America, its most profitable market.

Ferrari’s net profit rose to €400 million ($428 million) in the year to end-December from €290 million in 2015. Revenue climbed 9% to €3.11 billion.

Fourth-quarter net profit doubled to €112 million from the same period the previous year.

The company’s tax rate dropped to 29.5% in 2016 from 33.2% the previous year as Italy lowered its nominal corporate tax rate.

Investors cheered the results as well as Ferrari’s decision to pay a dividend on 2016 results of €0.635 a share, equivalent to a total payout of €120 million.

The stock was 3.7% higher in early afternoon trading in New York at a record $64.46.

The company forecast 2017 revenue will rise 6.3% to €3.3 billion.

Ferrari Profit Jumps as Sports-Car Maker Raises Sales Volume

May 4, 2017

Ferrari reported a 60% jump in first quarter profit as the Italian sports car maker continued with plans to slowly increase volume over the coming years.

Net income in the three months to the end of March rose to 124 million euros ($135 million) from EUR78 million in the same period last year. Revenue increased 22% to EUR821 million on the increased volume and higher sales of motors to Maserati, the luxury car maker owned by Fiat Chrysler Automobiles.

Despite the bumper first quarter that beat analysts’ expectations, Ferrari didn’t raise its financial forecasts for 2017. The company reiterated targets first released in February, saying it will sell about 8,400 cars this year, up from 8,014 in 2016. Gross operating profit is seen at about EUR950 million on revenue of more than EUR3.3 billion.