IPO of Ferrari 2015: Benefits, Drawbacks, Motivation, Underwriting, Pricing, Lock-up Agreements, Performance

BUSINESS ACCOUNTING AND
FINANCE

TABLE OF CONTENTS
TABLE OF CONTENTS................................................................................................................2
INTRODUTION..............................................................................................................................1
QUESTION.....................................................................................................................................1
i) IPO marks strategic milestone for the company......................................................................1
ii) What is the IPO over –allotment (Greenshoe) option? Did Ferrari include such options in
IPO?.............................................................................................................................................2
iii) Underwriting investment bank takes the central role in IPO process....................................3
iv) Book building of IPO.............................................................................................................4
v) Pricing of Ferrari IPO..............................................................................................................5
vi) What are IPO lock-up agreements?........................................................................................5
vii) Performance of Ferrari..........................................................................................................6
viii) Evolution of Capital structure of Ferrari..............................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUTION
Accounting and finance are two differential functions of the business. Accounting is
concerned with the recording of financial information and transactions for reporting and
informational purposes. Finance refers to the money required for carrying out the business
operations. This helps the business in making investments and monetary decisions that are
essential for the growth of the business. There are number of sources available to the business for
raising capital in which most common source is equity capital. Equity funds are raised by making
public offer where the people are invited to purchase the shares of company. These public
offerings are known as initial public offering and follow ion public offering. Present report is
based over the case study of IPO of Ferrari 2015. Report will cover the different facts and
outcomes related with the IPO made by the company in year 2015.
QUESTION
i) IPO marks strategic milestone for the company.
a) Generic benefits and drawbacks of going public.
Benefits
It gives increased access to the capital for company for meeting its cash requirements.
This will increase the public awareness by making the company public and making their
products known to newer group of potential customers. This will also increase market share of
the company for products and services.
Drawbacks
It increases the compliance requirements of the business which is regulated by Securities
exchange board. Raising the share capital will increase the sharing in profits. Cost of complying
with the requirements is high. They have to face added pressure of market for giving the
adequate returns to investors.
b) What has motivated Ferrari to go public?
Ferrari was required to make large amount of cash payments to FCA through sales of IPO
shares. Company has separated itself from FCA for which it is required to make the payments by
selling 17.175 billion shares. Company wanted to motivate and reward the management and
technical talents by giving them direct ownership in company (González, Téllez and Trujillo,
2019). It was also essential for promoting and extending the brand among the luxury brands.
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