The Prancing IPO
Own Ferrari without owning a Ferrari?
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Enter Sergio Marchionne. Now I am a huge Sergio fan. This guy is not your typical auto exec. His office isn't in the highest part of the tallest tower in Auburn Hills, and he doesn't wear a hand-crafted suit made of million thread count cloth. Not dogging in the man's style (his wardrobe is for sure worth more than mine and most others), but basically he is normal guy that doesn't conform to what might be considered the norm. He is his own man. On top of all that, he is a financial wizard. I was skeptical when he took over the reins at Ferrari only because he seemed to have so much on his plate to begin with. In the end I knew a car-guy, albeit one with a CPA/MBA, was in charge.
So now when I heard he wanted to spin off Ferrari, I started trying to guess how long it was going to be before the geniuses of Wall Street started pushing Ferrari to pump volume. I saw a horrible future where there was now some entry-level Ferrari with a turbo-six, and four doors...just so every 30 yr-old analyst could flash their Ferrari key at the bar. Then I started thinking about another thing, the value. What is it worth?
One of the hardest things to do during the IPO process is to define value. Let's not talk about the book value of the assets, or even some multiple of revenues. How do you put a value on the history & heritage? Can you really put a value on it, package it up into little shares and then float them on the market? I understand there are a lot of different ways to come to a valuation, and you can come up with a value of the brand. That's a normal practice and people have been doing it for years. The question that I am really asking is if this is a responsible thing to do. Don't we have a responsibility to keep some things sacred? Should the management at Ferrari to have to answer questions from analysts from BofA, RBC, Morgan Stanley, and a bunch more? I don't know. As I am typing right now, I have the earnings call playing in the background. Already talks about how volumes/deliveries are increasing in FY2016, ramping up the motor business, etc. etc. etc.
For now I am staying positive. I still think they have the right leaders in place and can keep some of the noise out. There is an argument to be made that spinning-off the brand shields it from some of the measures that FCA has to take to compete in the dynamic auto industry of today. And hey, Sergio has better reason to bring Alfa back to F1. We might continue to see more of this kind of activity; whether it is a supercar manufacturer having to align itself with an OEM to stay on top of emission/fuel economy regulations, or just outsiders with money coming in and buying brands. As long as we don't erode the history bring it on, but that might be a hard bump to avoid. For now we are safe, and the horse is still prancing.
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