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Ferrari IPO Case Solution & Answer

Ferrari IPO Case Study Solution

Implications of Strategy

The often cited and most obvious benefit of going public through IPO is money. The proceedings from the IPO tend to provide an ample justification to go public, without considering other implications, by particularly considering many investment opportunities available due to the capital. The money provided by the IPO could be used to transform the company’s growth trajectory. Additionally, as every organization has stakeholders who contribute a significant amount of resources, money and time with the hope of creating the organization successfully. If investors and founders go for years without seeing any return against their investment &amp and contribution then the IPO is an exit opportunity for them, by availing which they could liquefy tied up capital and receive a massive amount of money. Since IPO has the potential to generate a massive amount; it seems attractive for founders and investors who often feel that it is the time to gain compensation for the sweat equity years. With an ultimate desire of growing into the competitive market; the company needs an increased exposure to the potential customers who know about the product. This exposure is provided by IPO as it thrusts the organization into the public spotlight. When the company decides to go public, it just not only get the attention but also gains credibility as well. Furthermore, the company needs to pay the highest rate of interest in order to take a loan from financial institutions or give ownership to get the required capital from investors, but IPO lowers the challenges and difficulties in receiving an additionally required capital. Lastly, when the company goes public; it has the option to issue stocks as a mean of payment rather than using cash amount. The company could effectively utilize the amount raised from IPO through investing in asset base & improving the market combativeness.

Question 2

The calculations in Exhibit 8 is correct because it is done on the basis of data provided in the case as well as the expected growth. Ferrari has made an inclusion of an IPO over allotment (green shoe) option, as the underwriters of the company’s initial public offerings have exercised in full option to purchase the additional shares, which in return has boosted the total size of the IPO of 18.9 million. Additionally, the Fiat Chrysler has projected 80 percent stakes when the green shoe gets exercised, and plans to distribute the remaining shares in Ferrari to its stockholders by the year 2016………………….

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