Ferrari IPO: Fiat Chrysler (FCAU) Is Spinning Off Historic Brand

Get ready, investors. The Ferrari IPO is coming. Automaker Fiat Chrysler (FCAU), which owns 90% of the luxury Italian sports car manufacturer, filed an S-1 with the Securities and Exchange Commission on Thursday announcing the spinoff.

ferrari-stock-logo-185Fiat, the seventh-largest automaker on the planet, owns a large line of brands; Alfa Romeo, Chrysler, Dodge, Fiat, Jeep, Ferrari, and Maserati all count themselves as parts of the FCAU portfolio.

The price of the Ferrari IPO is not yet known, as the S-1 is preliminary and merely serves to announce the offering and give a few numbers. Here are the numbers investors need to know:

  • 80% of Ferrari will go to existing FCAU shareholders, while 10% will be offered in the Ferrari IPO and another 10% is owned by Piero Ferrari, son of the company’s founder, Enzo Ferrari.
  • Revenue came in at 2.76 billion euros in 2014, an 18.8% increase from 2013. Net income rose 10% year-over-year to 265 million euros.
  • Operating margins are much higher than industry averages, due mainly to Ferrari’s low-volume, high-price business. To give you an idea of how impressive margins are, consider fiscal 2014 operating margins relative to industry peers: Ferrari: 14.1%. Toyota (TM): 8.9%;Honda (HMC): 6.3%; and Ford (F): 3.9%.

Those numbers are all pretty impressive, but there are two major questions going forward. 1) What will the Ferrari IPO price be (and what valuation will that give the company), and 2) How exactly can a luxury automaker like Ferrari — a 68-year industry veteran that prides itself on exclusivity — manage to grow?

The first question will resolve itself in time. Ferrari stock will list on the New York Stock Exchange and the IPO should happen sometime in September or October. The second question is far more concerning.

Ferrari will likely still keep its caps on volume growth to stay exclusive, but those growth caps might have to rise a little bit to please investors. Last year, volume growth in the Americas was capped at 7.9%. The company sold a little more than 7,000 cars last year, and year-to-date sales volume is down 2.1% when compared to 2014, according to The Wall Street Journal. June sales volume was down 10.2%.

If the company wanted to, it could easily expand production without significantly damaging exclusivity and its brand. 7,000 units is a tiny number, and FCAU CEO Sergio Marchionne has reportedly acknowledged this, hinting that volumes could grow to 10,000 annually without diluting the brand.

I agree, it’s doable. Now we’ve just got to twiddle our thumbs and wait to see where the Ferrari IPO prices.

As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.

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