Ferrari raises 900 million dollars on the stock market
To reduce its debt and finance its future product plans, Fiat decided to list Ferrari on the stock market. This allowed it to raise $900 million, notably thanks to the strength of its presence in Formula 1.
Ferrari is the only team to have been present in F1 since the beginning of the championship. This has allowed it to create a reputation and attract millions of fans for decades. Under the presidency of Luca di Montezemolo, the team even managed to turn this legacy into substantial financial gains, as Ferrari receives a payment of about 5% of F1’s revenue, regardless of its position in the championship, in addition to its performance bonuses.
But this presence in Formula 1 is also one of the foundations of its brand image, which can only enhance its attractiveness to millionaires able to afford one of its road cars. Thus, in its stock market introduction prospectus, the company does not hesitate to draw the link between the two activities: « In addition to the research and development of our racing activities, our central role in Formula 1 offers us an incomparable platform on which we can promote our brand and our technological capability. Therefore, we do not need to use mass advertising, which would conflict with the image of exclusivity that our clients and fans expect and which would therefore be detrimental to our brand. »
Another way the company has found to monetize its popularity in F1 is by developing a full range of merchandise in its colors, whether it be clothing, watches, or theme parks, like at Ferrari World in Abu Dhabi: « We license the Ferrari brand to a number of producers and sellers of luxury goods and sell the products under the Ferrari brand through 23 licensed stores and nine owned by us, as well as on our website. »
In total, F1 brought in 417 million euros in revenue for Ferrari, to which a significant portion of the 311 million euros from the Maranello engine branch must be added. This branch indeed includes both the supply of engines to Maserati and to other F1 teams. Thus, it can be estimated that nearly 20% of the manufacturer’s revenue is directly linked to F1, since its total revenue amounted to 2.7 billion euros.
It can nevertheless be noted that, in the first three months of the year, Ferrari received five million euros less than in the same period in 2014 for its F1 engine part, certainly due to the agreement with Manor, which provides for the delivery of the 2014 engine and not the latest available version. However, this slight decrease is more than compensated by the eight million euro increase in the contribution paid by the FOM.
Similarly, the publication of the manufacturer’s financial data also allows the measurement of the financial impact of the introduction of the new V6 hybrid engine. Its development resulted in an increase in research and development costs of 26 million euros between 2012 and 2013. However, the 2014 season did not meet the Scuderia’s expectations; significant investments were then made to increase the performance and reliability of this power unit. Thus, the increase reached an additional 56 million euros between 2013 and 2014.
These combined forces allowed FIAt to offer its shares at $52 per share, which is the upper end of the indicative range that had been communicated to investors. With 17 million shares put up for sale, the sale therefore brings in $893 million to the parent company, to which will be added $3.2 billion in cash that Ferrari will pay to FIAt before the final sale takes place next year.
This demonstrates how essential F1 is to the strategy of Ferrari and its future former parent company. Which made past threats of leaving this sport all the less plausible…
With the participation of www.racingbusiness.fr
