Ferrari makes fat profits. Fiat Chrysler Automobiles NV Chief Executive Officer Sergio Marchionne will now know its affect.
On Sunday 80 percent of the shares of Ferrari NV, which makes the $324,000 Berlinetta coupe, were transferred to the Fiat Chryslar shareholders, in the ratio of one share of Ferrari to 10 Fiat Chryslar share. The super car maker, in addition to getting listed in the New York Stock Exchange in October is traded in Milan also from Monday.
Investors in Europe and the U S were convinced by Marchionne last month to invest in the Luxury car company, convincing them that the Ferrari company will increase its valuation by divesting from a mass producer company. However, Marchionne’s 48 Billion-euro ($ 52.1 billion) revamp plans for Fiat Chryslar, is bound to get hit by such a move. Already because of slow down in China and Brazil car market fall, has prompted Alfa Romeo and Maserati divisions to put off new models in favour of Jeep sport utility vehicle brand as their demands are increasing.
Vincenzo Longo, a strategist at IG Group in Milan opines “Investors are worried that the value of Fiat could be much lower without its crown jewel,”.
Shares of Fiat Chrysler were up 1.9 percent to 8.625 euros at 9:04 a.m. in Milan, and its market value at 10.9 billion euros. Its market capitalization prior to the Ferrari spinoff was about 16.7 billion euros. Ferrari traded at 42.40 euros, at a valuation of 8 billion euros.
In the mid October 2014, Turin, Italy based Fiat SpA and Chryslar Group LLC were merged and Fiat Chryslar was formed. After two weeks, the Ferrari spin off was announced and completed on Sunday. In Milan the stock value rose 69 percent in between. In an initial public offering, 10 percent of, Italy based Ferrari, Maranello, was sold two months ago. 10 percent of the holding is by Piero Ferrari, the son of founder Enzo Ferrari. The balance 80 percent stake remaining with Fiat Chryslar, is worth a market value of about $ 7.3 billion.
Ferrari which is valued at 26.5 times estimated 2016 profit. This is in comparison to French fashion company Hermes International SCA. Fiat Chryslar’s earnings are 8.6 times compared to General Motors Co.’s 6.4. Ferrari’s Chairman Marchionne is trying to attract investors by keeping the supercar manufacturer, instead of an automaker, a high end product maker.
