Back of the Envelope Calculation:
Ferrari IPO
Jiri Tresl, PhD CFA CAIA
University of Nebraska-Lincoln
Overview
Ferrari IPO
Valuation of IPO
Where is the stock now?
Ferrari History
Ferrari is an Italian luxury sports car manufacturer
Founded by Enzo Ferrari in 1929
Sponsored drivers and manufactured race cars before
moving into production of street-legal vehicles in 1947
Ferrari is one the world's most powerful brand (Brand
Finance)
Lego, Google, Coca-Cola, Disney, Rolex
Insight
1962 Ferrari 250
GTO
Most expensive car in
history
Sold for $38,115,000
in May 2012
Ownership before IPO
Fiat Chrysler (90%)
Italian Cars:
Abarth, Alfa Romeo, Fiat, Fiat Professional, Lancia
US Cars:
Chrysler, Dodge, Jeep
Luxury cars
Maserati, Ferrari
Other companies
Engine manufacturers, print,…
Basic Stats on October 19, 2015
Basic IPO Info
Ticker RACE US
Shares in IPO 17.18 mil.
Total Shares 188.9 mil.
Min stock price 48 USD
Max stock price 52 USD
Equity raised through IPO 859 mil. USD
Market Cap 9.45B USD
Place New York Stock Exchange
Ownership Changes
Ownership Before IPO
Basic IPO Info
Ticker RACE US
90 % Fiat Chrysler
Shares in IPO 17.18 mil. 10 % Piero Ferrari
Total Shares 188.9 mil.
Min stock price 48 USD
Son of Enzo Ferrari
Max stock price 52 USD
Ownership After IPO
Equity raised through IPO 859 mil. USD
Market Cap 9.45 mld. USD 81 % Fiat Chrisler
Place New York Stock Exchange
10 % Piero Ferrari
9 % free float
Future-Ownership Changes
Fiat Chrysler is getting rid of 9% now
It has plans to get rid of the remaining 81% later
It will distribute it amongst its shareholders
Largest owners
Exor 24% - owner of Fiat Chrysler
10% Piero Ferrari
Size of IPO and Purpose
17,18 mil shares at 50
Basic IPO Info
USD (midpoint) * =
Ticker RACE US 859 mil USD
Shares in IPO 17.18 mil.
Entire company would
Total Shares 188.9 mil.
Min stock price 48 USD be valued at 50* 188.9=
Max stock price 52 USD 9.45B
Equity raised through IPO 859 mil. USD
Expected Market Cap 9.45B USD
Place NYSE
Size of IPO and Purpose
Why are they doing the IPO?
Fiat wants investments for its other brands
Jeep, Alfa Romeo, Maserati
Lower its debt
Break Ferrari out of its own portfolio
Why is this beneficial?
Conglomerates-pros and cons
The conglomerate model served worked well for
FIAT
It was a family company
Operate in immature financial markets
Fiat as a holding company had access to better financial
information
Value gets trapped
Risk diversification within the portfolio
Ferrari is attractive enough to be taken out
Valuation of IPO
P/E
Price/Earnings Ratio
𝑃 𝑃𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 (𝑆𝑡𝑜𝑐𝑘 𝑃𝑟𝑖𝑐𝑒)
=
𝐸 𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒(𝐸𝑃𝑆)
How much are you paying per one dollar of earnings?
Example
Apple: P/E= 13.77
Google: P/E= 29.63
Ferarari
What do you think should it compared to?
That is the big discussion- what kind of company
is it?
Let’s assume it is a car company
Expected P/E Expected P/E
Com pany Com pany
(2015-2017) (2015-2017)
Suzuki 15.4 Mazda 8.2
Fiat 11.1 Daimler 8.2
Volvo 10.9 Ford 7.9
Honda 10.7 Renault 6.8
BMW 9 Kia Motors 6.7
Nissan 8.7 Volksw agen 6.5
Toyota 8.7 General Motors 6.5
Mitsubishi 8.7 Hyundai 6.1
Peugeot Citroën 8.3 Porsche 4
Min 4
Median 8.2
Max 15.4
P/E Valuation
𝑃 𝑃𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 (𝑆𝑡𝑜𝑐𝑘 𝑃𝑟𝑖𝑐𝑒)
=
𝐸 𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒(𝐸𝑃𝑆)
Car Industry P/E: Min 4
Median 8.2
Max 15.4
Ferrari EPS= 1.6
Valuation
Median
Ferrari at 8.2 * 1.6 = 13.12 USD per share
IPO at 48 USD-> 265% overpriced
IPO at 52 USD-> 320% overpriced
Min
Ferrari at 4 * 1.6 = 6.4 USD per share
IPO at 48 USD-> 650% overpriced
IPO at 52 USD-> 713% overpriced
Max
Ferrari at 15.2 * 1.6 = 24.32 USD per share
IPO at 48 USD-> 97% overpriced
IPO at 52 USD-> 114% overpriced
Valuation Summary
60.0
52
50.0 46.4
48
40.0
30.0
24.3
20.0
10.0 14.6
6.4
0.0
P/E of Car Industry P/E of Luxury IPO price
Brands Industry
Ferarari
Is Ferrari really a car company?
Is it a Luxury goods company?
Using our Insight
Fiat is pushing for the idea that Ferrari is not a car
company
It is a luxury brand
The production is limited
Value of Ferrari cars increases
How does the valuation look there?
Expected P/E Expected P/E
Company Company
(2015-2017) (2015-2017)
Kate Spade 29 Jimmy Choo 17.2
Remy Cointreau 25.3 Pernod Ricard 17.1
L'Oréal 25.1 Laurent-Perrier 16.7
Prada 19.4 Christian Dior 15.5
Louis Vuitton Moet Hennessy 19 Michael Kors 9.1
Hugo Boss 17.7
Min 9.1
Median 17.7
Max 29
P/E Valuation
𝑃 𝑃𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 (𝑆𝑡𝑜𝑐𝑘 𝑃𝑟𝑖𝑐𝑒)
=
𝐸 𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒(𝐸𝑃𝑆)
Luxury Brands Industry P/E:
Min 9.1
Median 17.7
Max 29
Ferrari EPS= 1.6
Valuation
Median
Ferrari at 17.7 * 1.6 = 28.32 USD per share
IPO at 48 USD-> 70% overpriced
IPO at 52 USD-> 84% overpriced
Min
Ferrari at 9.1 * 1.6 = 14.56 USD per share
IPO at 48 USD-> 230% overpriced
IPO at 52 USD-> 257% overpriced
Max
Ferrari at 29 * 1.6 = 46.4 USD per share
IPO at 48 USD-> 3.4% overpriced
IPO at 52 USD-> 12% overpriced
Valuation Summary
60.0
52
50.0 46.4
48
40.0
30.0
24.3
20.0
10.0 14.6
6.4
0.0
P/E of Car Industry P/E of Luxury IPO price
Brands Industry
Conclusion of IPO
Ferrari is a prosperous firm
Nice margins for car companies
But it doesn’t offer much of an upside
Limited car production to keep luxury status
Possibility is to branch out into other segments
Time will tell
Stock price is high
Driven by the opportunities of the brand
Conclusion
Buy the car and not the stock
Overview
Ferrari IPO
Valuation of IPO
Where is the stock now?
After IPO
Let’s look at it!
Overview
Ferrari IPO
Valuation before IPO
Where is the stock now?
Summary
Wall Street Finance is not only about numbers
It is about stories
But to tell stories - you have to master the
numbers
Financial Statement Modeling and Valuation Modeling
But you have to master the financial statements
Excel skills
How to get Wall Street Skills?
US Training Providers are Expensive
Wall Street Prep, Wall Street Training, Breaking Into Wall
Street
Regional Solution
Prague-based educational venture Professional Knowledge
Applied(pkA) represents them in Central and Eastern Europe
pkA provides subsidies for students and professionals from
the region, [Link]
Wall Street Skills :
[Link]
Regional discounts
If interested talk to me after class or email me (jtresl@[Link])
Thank you
Questions?
jtresl@[Link]
