To gain the necessary funds for its ambitious growth strategy, Fiat Chrysler Automobiles is going to spin off its most prized possession – Ferrari – and then hope it will remain attractive enough to investors.
Analysts and industry experts see a reversal of the stock’s gains once the Ferrari spin off is completed, though the carmaker believes its prospects are positive thanks to the returning European auto market, soaring earnings margins and popular new models. The stock of the third largest US automaker and the world’s seventh biggest carmaker has been on the rise since early last year as investors were lured by the full merger of the Italian carmaker Fiat SpA to its wholly owned subsidiary in the US – Chrysler – as well as the listing of the new group on the New York Stock Exchange. Additionally, the shares gave also jumped more than 80 percent since last October, when FCA chief executive officer and Ferrari Chairman Sergio Marchionne announced Ferrari would become independent. The catch was that only 10 percent of the new company would be offered on Wall Street and around 80 percent of it would belong to Fiat Chrysler Automobiles (FCA) shareholders.
Some analysts and industry experts forecast that once the spinoff is completed, investors will return to worries about the company’s incredible debt and the challenges in front of its very ambitious recovery plan, centered around the global prospects of the Jeep SUV brand and the reestablishment of the sporty Alfa Romeo marquee. The worries could be mitigated by the better than forecasted second quarter results, the recovering European market and the rave reception to the first new Alfa Romeo model.