Angelo Meda, Head of Equities Banor SIM and Investment Advisor Banor SICAV Italy Long Short Equity, interviewed by Plus, Il Sole24Ore supplement, share his view on the Ferrari’s next steps after the Wall Street IPO.
Read the full article below.
PLUS – il Sole 24 Ore
Ferrari’s appeal is listed. What retail will do?
The stock’s arrived on the US market, plus two other opportunities: the spin-off from Fiat and the launch in Milan
By Andrea Gennai
It’s undoubtedly the world’s most famous Italian brand. And now Ferrari has made its debut on the stock exchange. So now, even small investors can include Ferrari shares in their portfolio. But what’s happened so far, i.e. the listing on Wall Street (see also the other feature, below), is just the first step in a more complex operation. An intermediate stage, to be followed first by hiving off Ferrari from Fiat Chrysler Automobiles (FCA), which still controls 80% of the Maranello-based carmaker, and then listing the company on the Borsa in Milan. “Ferrari’s IPO on Wall Street”, explains Angelo Meda, equities portfolio manager at Banor Sim, “allows us to give a precise evaluation of the ‘prancing horse’ and so to establish its importance within FCA. Until a few months ago, it was valued at 5 to 6 billion, while the listing has given it a capitalisation of around 10 billion. In that light, we know that about 5 euro (of the current 14) of the value of Fiat stocks can be attributed to Ferrari. The shareholders’ meeting will take place in December, with the remaining 80% of Ferrari held by FCA being allocated to the shareholders. One Ferrari share will be allocated for every 10 FCA shares. Once the operation is completed, we think in early January, probably coinciding with the listing in Milan, Ferrari’s floating stock will go from the current 10% to over 60%. This increase in the floating stock will bring in new shareholders, including private investors who want a stake in Ferrari. If we assume that at present the stock on Wall Street is too volatile, one strategy could be to buy FCA shares in advance, in the run-up to the divestment. Of course, that means investors would also be exposed to fluctuations in the FCA price. And opinions vary among analysts as to the effects after the operation is concluded. “Right now”, continues Meda, “the price of FCA, without Ferrrari, only takes account of the American side and essentially values the operations in Europe and Brazil at zero. So we don’t think FCA stocks will suffer a backlash after the Ferrari spin-off, bearing in mind that alliances are another a hot topic that will probably be next on FCA’s agenda after the Ferrari operation”. Forecasting these effects is always very complex. “Anyone buying FCA stocks today”, explains Gabriele Gambarova, analyst at Banca Akros, “is doing so partly to have Ferrari shares at the time of the spin-off, with the shareholders’ meeting taking place in early December. The value of the stock is in part being underpinned by this expectation. Once the Maranello company has been hived off, FCA could experience some repercussions, given that the evaluation is not that cheap. So the outlook could change in the light of new alliances or an upwards adjustment of growth projections”. Once they’ve assessed the situation, investors can opt to buy FCA in the run-up to the Ferrari spin-off or wait for the latter to make its debut in Milan’s Piazza Affari. At that point, they could buy Ferrari shares directly, in a scenario of increased floating stock and without the dollar-effect, which at present weighs on trading on Wall Street.Another way to ride the Ferrari wave indirectly in the run-up to the spin-off is to buy Exor, the upstream “strongbox” that owns a significant holding in FCA. “With this operation, Exor will receive 23.3% of Ferrari”, underscores Martino De Ambroggi, analyst with Equita Sim, “and, thanks to the double-vote mechanism for long-term shareholders, could have full control of the Maranello company, along with Piero Ferrari. That way, downstream, it would no longer have a conglomerate but two entirely separate holdings, FCA and Ferrari. Exor is already seeing the effects of this prospective operation and the Net Asset Value (NAV) discount has decreased to just 10%”.
FUTURE STEPS LEADING UP TO THE FERRARI SPIN-OFF AND THE EXPANSION IN FLOATING STOCK
After the IPO on Wall Street, Ferrari’s capital is structured as follows: 80% of Ferrari NV is still owned by Fiat Chrysler Automobiles (FCA), which itself is a Dutch holding, and 10% by Piero Ferrari (son of the founder), while 10% is on the market. Then Ferrari NV will be hived off from FCA. An extraordinary general meeting of FCA shareholders, which could take place in Amsterdam in early December, is expected to give the go-ahead for the operation. In stages, the 80% of Ferrari still owned by FCA will be allocated to FCA shareholders and holders of convertible bonds. Current FCA shareholders will receive one Ferrari share for every 10 shares they hold.
On the up
Performance of FCA shares in Milan over the last three years
Performance of Exor shares in Milan over the last three years
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