Ferrari races off on Wall Street

After much public fanfare, Ferrari has listed on the NYSE and what a start it got! Shares of the Prancing Horse from Italy got off to a flying start when the luxury Italian sports car company, founded by motor racing driver Enzo Ferrari in 1929, floated on the New York Stock Exchange on Wednesday with shares in the company (listed under the ticker RACE) jumped up 17% at the opening before falling back a bit, and settling at 7% higher, or US$55, making the company worth a little over US$11 billion.

This of course means that Piero Ferrari, Enzo’s son, who will retain his 10% of the company, is now worth US$1.1 billion. Wonder if he needs any help carrying his bags?.

As you would expect, showmanship and theatre were evident at the launch, with eight of Ferrari’s finest offerings, including the current Formula One car and the new 488 GTB model, lined up outside the stock exchange as Piero along with, Sergio Marchionne, CEO of Fiat Chrysler, and Ferrari’s Chief Executive, Amedeo Felisa, rang the opening bell. 

Marchionne, who was wearing his trademark black sweater rather than a suit jacket, sought to reassure Ferrari lovers that the IPO was not the first step to mass production.

“What is at the heart of the brand is this intimate relationship between us and the customer base,” he said. “Therefore it would be almost suicidal to try to expand volumes to the detriment of that relationship.”

Fiat Chrysler, which owns 90% of Ferrari, floated 9% of the company and plans to sell the rest of its stake over the next year. The share sale is critical to help struggling Fiat Chrysler finance a revamp of its Alfa Romeo, Jeep and Maserati brands.

Even though you may think that Ferrari is a household name, the company still thought it necessary to go on a months-long roadshow before the sale to tap interest from retail investors and Ferrari owners, some of whom said they got letters this summer inviting them to buy company shares once it listed.

“A classic Ferrari is a better investment than the stock, but I still plan on buying shares,” David Radeloff, who has owned a number of the cars, told Reuters before the offering.

The strategy demonstrates an understanding of what drives many investment decisions, said Meir Statman, a professor of finance at Santa Clara University and author of What Investors Really Want.

“The utilitarian benefits of a Ferrari are no different from those of a Toyota,” he said. “Both will take you from home to work and back. But Ferraris yield expressive and emotional benefits that Toyotas cannot match. A 70-year old in a Toyota is old, but a 70-year old in a Ferrari is young.” Okay, Mr Statman, we will take your word for it.

images: www.skysports.com