1. Stock Market Analysis and Personal Finance Mr. Bernstein The Ferrari IPO October, 2015

2. Stock Market Analysis & Personal Finance Mr. Bernstein What is an IPO? IPO = Initial Public Offering Some companies do not want their shares to trade freely in an open market. Their stock is known as Private Equity. When the owners of a private company wish to sell shares to the public for the first time, it is known as an IPO. 2

3. Stock Market Analysis & Personal Finance Mr. Bernstein Widely known private companies Startups (Facebook, Twitter, Alibaba) Family Businesses (M&M Mars) Divisions of larger companies (Heinz, Fruit of the Loom, Dairy Queen) 3

4. Stock Market Analysis & Personal Finance Mr. Bernstein Why do companies go public? Can raise funds faster and more easily than in private market Convert holdings into cash to be deployed elsewhere 4

5. Stock Market Analysis & Personal Finance Mr. Bernstein Why is Ferrari Going Public? Currently 80% owned by Fiat Chrysler and 10% owned by the Ferrari family Wants to fund a 5-year expansion plan Looking to become a luxury brand, not just a car manufacturer 5

6. Stock Market Analysis & Personal Finance Mr. Bernstein Ferrari IPO Basics Selling ~17mm shares at a price range of $48-$52 Likely timing is next Monday Ticker will be RACE 6

7. Stock Market Analysis & Personal Finance Mr. Bernstein The IPO Process Ferrari works with one or more Investment Bankers Investment Banks – Work with investors and corporations – May arrange “road show” to formally allow Ferrari to tell their story to potential investors – Help both Ferrari and potential investors set a fair price – May guarantee a price to Ferrari 7

8. Stock Market Analysis & Personal Finance Mr. Bernstein The IPO Process Can investors use Technical Analysis? Here is a chart of Ferrari’s recent price: It hasn’t traded yet!! 8

9. Stock Market Analysis & Personal Finance Mr. Bernstein The IPO Process Can investors use Fundamental Analysis? Ferrari management will provide potential investors their estimates of future earnings They will also provide their business strategies Investors can assign a P/E ratio to the earnings estimates to determine a fair price The IPO price is, in general, at a modest discount to consensus fair value to insure a smooth sale 9

10. Stock Market Analysis & Personal Finance Mr. Bernstein The IPO Process Investment Banks and Ferrari both want the stock to rise following the IPO to insure investors will come back next time they want to raise funds 10