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Fiat Chrysler falls as Ferrari misses investors’ high expectations
MILAN — Shares in Fiat Chrysler Automobiles fell more than 3% in early trade on Wednesday, after the flotation of its Ferrari luxury unit was priced at the top end of the range but below the expectations of some investors.
Maranello-based Ferrari’s Wall Street debut was due later on Wednesday.
Fiat Chrysler is selling up to 10% of the maker of red supercars bearing the prancing horse emblem at $52 per share, the top end of a range between $48 and $52, assigning Ferrari a stock market value of $9.8bn.
Press reports in recent days had suggested the offer could have been priced at up to $60 per share.
Broker Banca Akros said that while the higher expectations may initially impact Fiat Chrysler shares, it expected Ferrari to "have a good start, thus pushing the Fiat Chrysler share price up in the latter part of the trading day".
Fiat Chrysler shares, which had risen on Tuesday to their highest in more than two months, were down 3.3% at €13.75 at 9.15am in Milan.
Fiat Chrysler, which owns 90% of Ferrari, is set to raise $893m through the offering, which could rise to $982m if demand is strong enough for the exercise of a "greenshoe" option of additional shares.
Proceeds of the offering will be used to help fund Fiat Chrysler’s €48bn turnaround plan, centred on the revamp of its Alfa Romeo, Jeep and Maserati brands, as it seeks to boost global sales to 7-million cars by 2018.
A successful listing will bolster Fiat Chrysler’s finances at a time when its calls for a merger partner have fallen on deaf ears.
Chairman Sergio Marchionne, who is also Fiat Chrysler’s CEO, will ring the opening bell at the NYSE with other executives, including vice-chairman Piero Ferrari, the son of founder Enzo Ferrari, and Fiat Chrysler chairman John Elkann, whose family will become Ferrari’s biggest shareholder after the spinoff from its Italian-US parent company next year.
Fiat Chrysler shares traded in New York have risen more than 60% since October 28 2014, the day before Mr Marchionne announced the plans for Ferrari.
That is the best performance among major automotive industry stocks — compared with a gain of about 7% for General Motors and a plunge of almost 40% for the preferred shares of Volkswagen, the German company that has been grappling with a diesel-emissions test-cheating scandal in the past month.
Investors’ demand for Ferrari shares greatly exceeded the number available, people familiar with the matter said last week.
Fiat Chrysler is limiting the stock on sale to ensure it is sought after, in the way that Ferrari boosts its products’ allure by capping the number of cars it makes.
Fiat Chrysler plans to distribute its remaining 80% stake in Ferrari to its own investors early next year. Mr Ferrari will retain his 10% holding.
Interest in Ferrari contrasts with lacklustre demand for other IPOs. Three US deals faltered within about a week this month, as Digicel Group cancelled a sale, First Data priced shares below a marketed range and Albertsons postponed its offering.
Reuters and Bloomberg