Ferrari is an Italian company that has been producing luxury sports cars since 1947, and was founded by Enzo Ferrari who formed the Scuderia Ferrari racing Team in 1929. There are lot of independent car companies similar to Ferrari, but unlike the others, the Fiat Group-owned Ferrari continued to thrive hard even after the death of the charming founder and in result, today Ferrari is one of the most successful sports car companies in the world.
The RACE in the financial market
Fiat Chrysler Automobiles has made news by starting the process of making Ferrari public. Chrysler Automobiles see a lot of value in Ferrari and is only offering 10 of its 90% stake in the initial public offering (IPO). The Remaining 10% of company’s shares belongs to Piero Ferrari who is the son of Enzo Ferrari, who refuses to sell his shares.
Now that Ferrari is open for the public here are a few things you should consider before investing into Ferrari
1. Ferrari shares costs a lot
Since Ferrari is a luxurious sports car it is only expected that the cost of shares will be sold at a high premium. With that, investors can consider buying Fiat Chrysler Automobiles shares instead. Think about this, with only 10% included in the IPO, 80% ownership in Ferrari will be distributed among fiat Chrysler Automobiles’ Shareholder.
2. Profitability as an Automaker may be questionable
When it comes to operating profit margins, Ferrari can be the most successful car maker in the world, However, when its annual sales is taken into consideration, it is still over shadowed by other automakers, and as far as we know there are no plans to increase its volume.
3. Ferrari may not have a plan to expand
There are rumors that Ferrari is facing the possibility of expanding its sales by 10,000, however, this signifies a very small amount of growth and shows that volume growth may not be in Ferrari’s top priority.
4. The Ferrari IPO is leading towards a Mega-Merger
With all the competition in the automobile industry, Chrysler Automobiles may be facing fierce competition from large-scale Automobile makers like Toyota and Volkswagen. This put constant pressure in the cash flow of and cash reserves on the company. The IPO is expected to rise between $400 to 600 million depending on the premium. This means that there is a possibility that Chrysler Automobiles might merge with other large car manufacturing companies like General Motors.