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Loyalty boost

23 Jul 2015 By Richard Beales

Ferrari is rolling off the financial production line with a customized Fiat part. The Italian supercar producer’s Dutch holding company, currently named New Business Netherlands, on Thursday unveiled detailed plans to go public in New York. It’s giving an extra vote to shareholders who hold stock for three years, a governance component also built into its parent, Fiat Chrysler Automobiles, by boss Sergio Marchionne.

After the Ferrari initial public offering, FCA plans to spin off its remaining 80 percent to its shareholders. The loyalty voting bonus will leave the Agnelli family with a say bigger than its roughly 24 percent economic interest in Ferrari. The same goes for Piero Ferrari, son of founder Enzo, who holds 10 percent.

Devotees of the F12berlinetta and other high-octane models nevertheless may see some allure in the structure, especially if the shares benefit from the halo of exclusivity surrounding the company’s classically red vehicles. It has traditionally limited supply to ensure customers are always waiting, even for the LaFerrari limited edition which costs over 1 million euros. That’s one reason Brand Finance rates the company’s prancing horse logo as one of the most powerful global marques, with a value of $4.7 billion.

Whoever buys into the IPO can earn an extra vote per share by sticking around. That makes Ferrari’s loyalty shares an improvement over the more typical and immutable super-voting stock found at the likes of Google. The question is whether even eager buyers will stay the course.

After all, Marchionne reckons Ferrari is worth more than 10 billion euros. An analysis comparing the company with other carmakers instead of luxury groups produces a figure nearer half that. To earn a valuation sustainably in 11 digits – even on a luxury enterprise value multiple of, say, 12 times trailing EBITDA – will require Ferrari to improve on last year’s 693 million euros of adjusted EBITDA, which could mean selling considerably more cars than the 7,000 or so it shipped.

Such expansion could in turn create production challenges and even make Ferraris seem less exotic. The company’s lackluster performance in Formula 1 racing of late is a sign that precision isn’t guaranteed. Attempting to live up to Marchionne’s expectations could drive otherwise faithful investors away.


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