The stock of Fiat Chrysler Automobiles traded at a six-month high after shares jumped more than 18% following the recent announcements that Ferrari would be spun off as an independent luxury brand.
While the news that shares of a company that actually loses its most precious asset might be disconcerting for many, there’s a hidden layer of the deal. The company issued a statement and said that investors that participate in a mandatory convertible bond issuance worth $2.5 billion can also reach out to the Ferrari Spin off and get shares of the brand. Actually, 80% of the Italian sports car manufacturer’s share would be divided among FCA shareholders.
Roberto Lottici, a Milan-based fund manager for Ifigest, thinks the seventh-largest global carmaker’s executives “have sorted out their capital worries in one go,” but pointed out that the Ferrari deal seems to be a compensation for those participating in the convertible bond – the financial results are seen by many analysts lagging the highly ambitious strategy set for the period to 2018.
According to a Milan broker, Ferrari has an equity value of 5.8 billion euros, but others have assessed the net worth to be close to 10 billion euros. Following the third-quarter financial results and the capital changes announcements, shares of Fiat that were traded in Milan rose 14% to 8.70 euros, after they were up as much as 9.025 euros, their highest valuation since April 23.