Post by CookinFlat6 on Jul 30, 2015 1:33:24 GMT
So finally, Sergio has hit the 'commit' button on the sale of the expensive asset within his Fiat empire that cannot be optimised for high turnover and profit. This was announced over a year ago and now Fiat which owns 90% has filed with the New York Stock Exchange to offload Ferrari (Pending:FRARI) at its IPO debut.
So we now have some details in their preliminary prospectus to look at. And the first thing to note is that if the IPO could have been pulled off earlier it would have been done, and right now with China 'devaluing' its stock market, we can safely conclude that Sergio is no stranger to fire sales.
The Ferrari proposition is simple, a traditional company relying on F1 racing pedigree and exclusivity to generate moderate growth, this however limits its potential for an exciting ROI. It is particularly vulnerable to global economic conditions and challenges to its brand. And while the brand has been recently claimed to be among the most valuable this remains hard to extract cash from for its investors with the traditional approach. Yes profits have grown, but of most concern for a debt laden Fiat is that Ferrari's cash flow has shrunk from 205 million euros in 2012 to 136 million euros in 2014. Cash flow was actually negative during the 2015 Q1 period.
A couple of curious points have popped up in the preliminary prospectus it does not state how many shares Fiat plans to sell nor their expected price range. The money earned through the IPO will go to Fiat Chrysler before Fiat and Ferrari split off from each another.
So the talk about selling only 10% and keeping the rest in the family is just not hard coded anywhere, so if the price doesnt collapse after the IPO, Sergio can flog the entire line on each uptick and give the family hard cash instead.
Also in the prospectus is the sales pitch that wont make for happy reading for traditional fans of Ferrari. The IPO will no doubt attract small investors who like the brand. The big investment funds however would not find the ROI of particular interest as it is now. The following is the clue found in the prospectus
"We believe we can grow in a controlled manner while preserving the exclusivity of our brand by continuing to focus on distinct market segments and maintaining a strong pipeline of new car launches."
Ferrari is working on building FerrariLand, a Ferrari-based theme park that will be based in Barcelona. It will be the second Ferrari amusement park after the construction of Ferrari World in Abu Dhabi in 2010.
So the implied selling point of Ferrari is, not just a company that sells cars and keeps exclusivity and hence pedestrian ROI, but a company that can potentially make a lot more out of a change of focus - into handbags, lalaland theme parks etc, 'unlocking the brand value' - the hint is where they say 'we can survive just on selling exclusive cars' - i.e 'we can continue to do pedestrian, but we want a change, come buy us'
Therefore its safe to say Ferrari as we knew it is complete history. Fiat want top dollar, and the ones paying top dollar will only do so with the certainty of CHANGING things around to exploit its brand and extract real money where a giant car maker could not.
Ferrari just doesn't have a high growth potential compared to other companies forming IPO's that go well (especially in these conditions). The companies hugely expensive F1 team does not help the ROI when their 2014 profit was a mere 265 million Euros. The spend on the ailing F1 team is at least twice that amount hence the troubled cash flow. Ferrari's lack of success and its arguable irrelevance on sales or the brand SO FAR will be a big driver in any ROI calculations.
In conclusion the old model by definition must be stripped and re-clothed in a way conducive to extracting any promised respectable cash flow. Its very possible that new investors will conclude that more profits can be extracted by selling handbags than racing cars!
Lets watch the how the spin emanating from Fiat changes as the IPO gets closer and Sergio starts throwing out the baby with the bath water as he increasingly highlights the potential for instant riches for investors who oversubscribe
So we now have some details in their preliminary prospectus to look at. And the first thing to note is that if the IPO could have been pulled off earlier it would have been done, and right now with China 'devaluing' its stock market, we can safely conclude that Sergio is no stranger to fire sales.
The Ferrari proposition is simple, a traditional company relying on F1 racing pedigree and exclusivity to generate moderate growth, this however limits its potential for an exciting ROI. It is particularly vulnerable to global economic conditions and challenges to its brand. And while the brand has been recently claimed to be among the most valuable this remains hard to extract cash from for its investors with the traditional approach. Yes profits have grown, but of most concern for a debt laden Fiat is that Ferrari's cash flow has shrunk from 205 million euros in 2012 to 136 million euros in 2014. Cash flow was actually negative during the 2015 Q1 period.
A couple of curious points have popped up in the preliminary prospectus it does not state how many shares Fiat plans to sell nor their expected price range. The money earned through the IPO will go to Fiat Chrysler before Fiat and Ferrari split off from each another.
So the talk about selling only 10% and keeping the rest in the family is just not hard coded anywhere, so if the price doesnt collapse after the IPO, Sergio can flog the entire line on each uptick and give the family hard cash instead.
Also in the prospectus is the sales pitch that wont make for happy reading for traditional fans of Ferrari. The IPO will no doubt attract small investors who like the brand. The big investment funds however would not find the ROI of particular interest as it is now. The following is the clue found in the prospectus
"We believe we can grow in a controlled manner while preserving the exclusivity of our brand by continuing to focus on distinct market segments and maintaining a strong pipeline of new car launches."
Ferrari is working on building FerrariLand, a Ferrari-based theme park that will be based in Barcelona. It will be the second Ferrari amusement park after the construction of Ferrari World in Abu Dhabi in 2010.
So the implied selling point of Ferrari is, not just a company that sells cars and keeps exclusivity and hence pedestrian ROI, but a company that can potentially make a lot more out of a change of focus - into handbags, lalaland theme parks etc, 'unlocking the brand value' - the hint is where they say 'we can survive just on selling exclusive cars' - i.e 'we can continue to do pedestrian, but we want a change, come buy us'
Therefore its safe to say Ferrari as we knew it is complete history. Fiat want top dollar, and the ones paying top dollar will only do so with the certainty of CHANGING things around to exploit its brand and extract real money where a giant car maker could not.
Ferrari just doesn't have a high growth potential compared to other companies forming IPO's that go well (especially in these conditions). The companies hugely expensive F1 team does not help the ROI when their 2014 profit was a mere 265 million Euros. The spend on the ailing F1 team is at least twice that amount hence the troubled cash flow. Ferrari's lack of success and its arguable irrelevance on sales or the brand SO FAR will be a big driver in any ROI calculations.
In conclusion the old model by definition must be stripped and re-clothed in a way conducive to extracting any promised respectable cash flow. Its very possible that new investors will conclude that more profits can be extracted by selling handbags than racing cars!
Lets watch the how the spin emanating from Fiat changes as the IPO gets closer and Sergio starts throwing out the baby with the bath water as he increasingly highlights the potential for instant riches for investors who oversubscribe
