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Ferrari IPO Questions

This case examines Ferrari's initial public offering in October 2015. It provides an opportunity to discuss the IPO process and perform valuations of Ferrari using market multiples and discounted cash flow analyses. Key discussion questions focus on how to position Ferrari to investors, whether financial forecasts are reasonable, and conducting valuations to determine an appropriate share price in EUR and USD.

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2K views1 page

Ferrari IPO Questions

This case examines Ferrari's initial public offering in October 2015. It provides an opportunity to discuss the IPO process and perform valuations of Ferrari using market multiples and discounted cash flow analyses. Key discussion questions focus on how to position Ferrari to investors, whether financial forecasts are reasonable, and conducting valuations to determine an appropriate share price in EUR and USD.

Uploaded by

Shu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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FBE

529 Spring 2021 - Ferrari IPO Case

This case examines the October 2015 initial public offering pricing decision for
legendary Italian sports car company Ferrari by Fiat Chrysler management. We will
evaluate Ferrari in light of Ferrari CEO Sergio Marchionne's interest in expanding
production despite the company's long-standing tradition of severely limiting
production strategy to maintain an exclusive brand image. The case provides an
opportunity to discuss the IPO and spin-off process and perform a valuation of the
company.

There is no deliverable due for this case but it is expected that you will perform
the analysis for both our class discussion and as a practice case for our midterm
on 3/15.

Discussion Questions:
• If you were the investment banker/underwriter on the IPO roadshow how
would you position Ferrari - as a car manufacturer or a brand? Explain your
answer. What other elements about Ferrari’s strategy would you highlight to
potential investors?
• Do you agree with the financial forecast in Exhibit 8? If so, why? If not, what
specific concerns do you have?
• Perform a valuation of Ferrari based on both a current market multiples
valuation and a DCF valuation. Prepare your estimate of price per share in EUR
and USD using both valuation frameworks. Note: The appropriate number to use
in the valuation is the post-money shares of 189 million.
• For the market multiples please refer to the HBS note “Corporate Valuation and
Market Multiples” and “Primer on Multiples Valuation and Its Use in PE
Industry” and determine the implied value based on an EV/EBITDA metric.
Exhibit 6 has data for comparable companies. The case also mentions a few
recent IPOs. The case provides Ferrari’s 2014 EBITDA. It also provides the
EBITDA for the first half of 2015 €348.19. Based on the comparable period for
2014, the Latest Twelve Month (LTM) June 2015 EBITDA was €673. To
determine adjustments to get to equity value you should use the most recent
balance sheet.
• For the discounted cash flow analysis, you will need to utilize data from the
forecast in Exhibit 8 to calculate Free Cash Flow. You will also need to assume a
perpetual growth rate for terminal value. WACC of 5% is given in the case (page
8). Steps: For the forecast period, calculate:
NOPAT
+D&A
-Capital Expenditures
-Change in NWC
= Free Cash Flow
Next step is to calculate terminal value and discount everything back to
present at Ferrari’s WACC. Then adjust get to Intrinsic Value of Enterprise
and also Equity Value. Determine the Implied Share Price in EUR and in USD.
• In preparation for Ferrari’s listing on the NYSE, at what price per share in EUR
and USD would you recommend that Ferrari shares be sold?

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