Ferrari Case Summary:

 Ferrari is a manufacturer of luxury sports cars in Italy. It was founded by Enzo Ferrari
in 1929. It used to sponsor drivers and manufacturing race cars before it started
production in steel legal vehicles.
 In terms of brand value, Ferrari is one of the powerful brands like Google, Lego,
Coco-cola etc.
 In 1962, Ferrari released a GTO Ferrari 250 which was the most expensive car in the
history sold for a value of $38115000
 The ownership in Ferrari company before the IPO was that 90% of company shares
are owned by Fiat Chrysler,10% by Piero Ferrari who is a son of Enzo Ferrari. The
ownership of the company after IPO will be that 81% will be owned by Fiat
Chrysler,10% Piero ferrari,9% is free float.
 Out of 118.9 Million shares, company will be releasing 17.18 million shares for IPO
subscription, minimum stock price would be 48 USD, and maximum share price at 52
USD. The total equity raised through IPO will be 859 million USD and the total
market cap will be at 9.45 Billion USD listed in New York stock exchange.
 The purpose of rising the money through IPO by Ferrari is because they require
money to develop their other brands such as Alfa Romeo, Maserati, Jeep. They were
also planning to lower their debt significantly. Also, to break out the Ferrari from their
existing portfolio
 They are doing this IPO after they observed that Fiat’s conglomerate model was
working well for them, Fiat is the parent company of Ferrari. They operate in
basically in Immature financial markets and had access to the other information as
well. Their value gets trapped if they did not go for IPO and it would let Fiat to risk
diversification in their portfolio. With big brand image of Ferrari, it is the best
available option for Fiat to release the Ferrari for IPO
 The median value of Ferrari would be at 13.12 USD (8.2*1.6) per share, when
compared to IPO at 48 USD it would be 265% overpriced, and 320% overpriced at 52
USD. Ferrari’s minimum value would be 6.4 dollars per share which would be 650%
and 713% overpriced when compare to IPO at 48 and 52 USD. Likely the maximum
value of Ferrari is 24.32 USD (15.2*1.6) which then would be 97% and 114%
overpriced compared to 48 and 52 USD
 When treating Ferrari as a premium brand the median, minimum, maximum valuation
of the company at 1.6 Eps would be 28.32, 14.56,46.4 USD per share which would be
70%,230%,3.4% overpriced at 46 USD per share and 84%, 257%,12% overpriced at
52 USD per share
 Ferrari is premium company with great brand value, but it doesn’t offer much profit
potential for investors as it produces limited cars to keep up their brand value and
luxury status. It would be good to buy Ferrari car than the stock itself as the brand
value is higher than their growth value.