Fiat to Spin off Ferrari

No wonder Luca left.

 

He's no fool.

With the note due in under two years that's one big nut to meet.

 

Anybody still believe that it would be bad idea if VW or BMW would buy Ferrari?

 

Wrong, with great respect. Stripping is exactly what it is. Ferrari S.p.A needs lots of cash to fund the R&D that continues to develop new cars and supports the F1 Scuderia. It means Ferrari will have to take on significant debt and, for me, makes my intended purchase of a few shares in the IPO disappear. Very bad news, but as David writes, not unexpected from the sweatered accountant.

 

Is it possible that the dividend is actually the Ferrari shares distributed to FCA shareholders? As I understand it, (feel free to correct me), Ferrari will assume debt in the form of the convertible bond and distribute the dividend as shares of Ferrari at a rate of 1 share of new Ferrari issue for each owned share of FCA. This accounts for about 5.5-6 billion total. Estimates for the value of Ferrari as a stand alone company range from 5-10 billion. After subtracting the dividend and the debt, that leaves Ferrari value at -.5 billion to 4 Billion. As an investor, (and F-car owner) I am counting on the same mindset for the stock demand as exists for the cars and other merchandise, which is a premium price for the novelty and exclusivity of the Ferrari name. That being said, I think there will always be a generous valuation of the stock price compared to the company's fundamentals. I have recently been buying FCA stock in anticipation of the distribution, with the hope that hype and flair will carry the price as it seems to do with the cars. Thoughts?

 

Short-term, yes. Long term, not so much