Now You Can Own A Piece Of FERRARI!
Everyone who is pursuing a PGPB or aspires to do one knows that no hours are going to be spent mugging up books one night before the exam, and rote can learn no concepts.
However the MISB Bocconi PGPB, takes the application of theoretical topics to another level.
While PGPB 3 student, AadilNaik was busy driving a Ferrari (I am serious, check out his post here – https://www.sdabocconiasiacenter.com/blog/campus/ferrari-458-italia-570-prancing-horses-let-loose-on-the-streets-of-maranello/)the PGPB 4 students were busy figuring out what drives the price of Ferrari shares in the financial markets.
If you are clueless about what I am talking about, and often find yourself googling – ‘*some recent financial news* for dummies’ – let me help you out.
On 21st of October 2015, Ferrari made its public-market debut in New York as owner Fiat Chrysler Automobiles sold up to 10% stake. (What the ‘Fiat’ right?) All Formula One enthusiasts, collectors and, of course, investors went into a frenzy as everyone wanted a piece of the prancing horse. Financial experts, brokers, and bloggers took over the Internet speculating the prices of the shares or the valuation of the 10% stake of the FCA.
And the students of PGPB 4 were asked to do the same.
Yes, you heard it right. During Financial Reporting and Analysis, Professor Antonio Marra challenged students to understand the Ferrari IPO in totality one day before it got listed on the NYSE.
Why Ferrari? Well because it is Ferrari, and he is Italian. (Duh)
But, on a more serious note – it was one of the burning hot issues in the financial markets and working on a topic that is currently trending, makes it more exciting and challenging. Every minute a new article was updated on the Internet with a newer piece of information. There were millions of point of views, and a plethora of opinions and we were asked to resonate with one or formulate our own.
Working on case studies does give you exposure to the real world situations but working on a live case study exposes you to a wider range of information sources like the news, newspapers, blogs, etc. that make it more thrilling.
None of us expected a subject like Financial Reporting Analysis to be so dynamic!
Professor Marra asked us to investigate the reasons behind Ferrari going public at this stage of its lifecycle and the basic framework of the IPO. However, the most interesting part of the assignment was when we were handed out Ferrari balance sheets to calculate the price at which Ferrari should float its shares.
We discovered that the reasons behind the IPO were extremely enthralling.
The IPO was only a part of the series of transactions intended to separate the Ferrari brand entirely from FCA. The separation of Ferrari from the larger Italian-US carmaker was done to preserve the cherished Italian heritage and unique position of the Ferrari business and allow FCA shareholders to continue to benefit from the substantial value inherent in this business. Other reasons were also to raise funds to repay the $10.8 billion debt that hung over FCA and also for the Investment Plan for Jeep, Maserati and Alfa Romeo – $48 billion over a distributed pattern in the future.
The class was extremely divided in opinions when it came to pricing. Some felt that the share prices should be as high as $65 as it is Ferrari, the Hermes of cars. Whereas some felt it would manage all its finances and purposes with pricing it at $45. But the answer was as always the great Bocconian answer – ‘It depends’.
Professor Marra concluded by telling us that there is no wrong or right price, what floats is the price that the market is ready to accept.
The next day we all were glued to the Internet to find out how close did we come with our speculations?
Finally, Ferrari shares were valued at $52 valuing the luxury carmaker at $9.8 billion. The IPO raised a whopping $893 million by selling around 17.2 million shares.
So all of you who think Accounting is “too dry a subject” study it the Bocconian way! The assignment was everything a Bocconian loves – prestige, luxury and challenge!
This post is written by Vibhuti Varma of PGPB4.
You can write to her at firstname.lastname@example.org