Report on an IPO marks a strategic milestone for a company

 Explain the generic benefits and drawbacks of going public.

The financial benefits in the IPO are to distinguish their capital from the market and develop the capital expenditure for the research and development of the specific project. There are different companies that are using IPOs to cash the successful market in the startup. The direction of the company’s management also increasing day-by-day to look in the rising profits of the management of the company is practising to boost up the earnings of the company by investing in different projects. It could be very high. The cost has only increased if the project is not successful, but in the case when the project is successful, the cost is.

The major drawbacks of going public using IPO is time and expense that they could be here by the company by are going for IPO. There must be 6 to 9 months or a longer period required for going IPO. During this time, the company's management is most likely to attend the IPO which could cause different areas suffered a lack of attention and may increase financial prices in the underwriting fees.

      ii.            What may have motivated Ferrari (Ticker symbol ‘RACE’) to go public? 

There are different things that are heating up in the market and Ferrari surprised by announcing proposed terms of its IPO and started in a different way. Fidelity expressed that they would float 17.2 million shares at $48- $52.It is approximately $1 billion at the midpoint and 10% of the company. So Ferrari is being valued at about dollar 10 billion. Ferrari is going to get the biggest IPO for the air and the payment process. First data schedule at the price that is announced as 160 million shares at $18.00, to $20. The decision about going for IPO is profitable for Ferrari and it is a unique product. As concerned with the stock, Ferrari is one of the unique product and watchers must have focused on the Delta and price with the range of different shares offered by the Ferrari.

    iii.            Why do you think Ferrari chose to list on New York Stock Exchange?

The reasons are such as it is highly dependent on the Formula One team and do collecting different kinds of aspect to promote the brand in the market by advertising it.

·         The other one is a low volume strategy that may increase the profit of the company and its project to the presentation of the number of cores and models in the company.

·         Licensing is a key element in the production on the market of vehicles and Ferrari is valuable as it is the luxury market of cars. There are several licensing partnerships, including Oakley sunglasses, Puma, Lego, and Microsoft did that deals with the Ferrari 2 deal additional risk that should be evaluated with the partner forms.

All these reasons are enough to go for IPO in the market stock market of Ferrari and it is helpful for gaining a better profit in the market.

    iv.            What can you say about the primary and secondary shares sold in the Ferrari IPO?

The automobile industry decides to sell more than originally planned 10% of Ferrari in the IPO and later year may be strong demand for the investor to invest in the capital of Ferrari. It could be considered that Ferrari isn’t quite in the budget right now and it should be that are listed in the 263 million shares. But there will be a certain level of nobility attached to this and the idea of owning such kind of pieces of the legendary brand is a valuable investment in the stock market. The glamour of brand name and IPO Designated a charm in the market that could be attracted to different kinds of investors.

Questions 2: A Greenshoe option is an overallotment in the stroke and it is the context of an initial public offering to Proviant in an underwriting agreement that grants different kinds of purple villages to sell investors and get more shares that are planned in the security of the. This investment Overallotment option is known as a greenshoe option that is based on the benefits ring, company and faces a different kind of issuance option in the IPO. A green true option is to provide additional stability and security. We called an underwriter, can increase supply and fluctuate the price of shared’s so it is used to measure the stabilization in the Securities and Exchange Commission. Typically it is allowed to underwriter to sell up to 15% more shares than the original amount assigned to them. For example, if the complete instruct the underwriter to sell 2200 million shares, the underwriter can share additional 30 million shares by exceeding greenshoe option as it is allowed with a specific percentage of IPO to sale in the market, according to the demand of the shares.

The Ferrari has the option of Greenfield so that to the underwriter could invest and sell the shares more than 30% of them (Duccamelia., 2016).

Question 3

a)      What are the key tasks executed by the underwriter?

Then the Director is the party. The director was selling shares that evaluate and assume the other part is the risk of getting the amount of critical Commission and premium spread or interest. Now the writer performs to sell the shares of the company and dirt to ensure the company that did the first time initial shares will be surely sold to the public.  According to these facts, the feast is given in the form of Commission premium and the spread of interest to underwriters is the critical body of the financial world.  This shows that the key tasks include the mortgage industry and insurance industry with the type of security day trading in the market (Duccamelia., 2016).

b)     What are the primary considerations when selecting an underwriter?

An underwriter is responsible for positioning and pricing. The marketing of initial offering shares that is a critical stage to ultimate success. The responsibility of an IPO candidate must be understandable by the dump stations of the contract that are used by the writers. The commitment of specific underrated noise according to the homework, and the parties must be intended to work with the necessity, binding good contracts and to do not commit such that are a lack of confidence in the underwriting of partners. There must be a binding contract and underwriting agreement between the underwriter and the companies. The conditions are normal and signed within the 24 hours that underwriting had received, though. Underwriting agreements come into basic types of from commitment and best efforts (Duccamelia., 2016).  

c)      Often, multiple underwriters are involved. In the case of Ferrari, a syndicate of 7 underwriters was involved in the IPO. What are the main motivations for syndication?

An underrated Sandy Gates was seen ascension in terms of officiating this among underwriters and used to improve the marketing and distribution shares of the borders that are relevant to the investors. Ferrari has a strong background in the new market and achieving premium valuation in the IPO of the ear. The final price valued Ferrari above many density brand name also digits multiple of a mass market. There were busy difficulty to position the elements to tell the story in the market with the coordination of for different cards over bearing Circle, America Merrill and JP Morgan. The managers in the common answers to underwriting the IPO in the market emerged to assess the additional managing underwriters to complete the under entangle syndicate. There are several possible explanations that are used to link between the enterprising and syndicate in the issuance of the IPO. Extra underwriters may reduce the pricing and improve the information or for production with the different kinds of theory that focus on a systematic role of IPO underpricing Its port, the hypothesis that larger syndicates produce information about the price is an eye appears in the Co-manager..

d)     How much compensation was paid to the underwriters of Ferrari? Do you think it is comparable to the average compensation paid to underwriters in US IPOs?

The strategy paid off with the IPO price in New York on Tuesday is at $1.52 per share. The IPO gives Ferrari a market capitalization of around 9.8 billion. This prize is paid by Ferrari to the people who are underwriting the IPOs of the Ferrari. According to my analysis, it is incomparable average compensation that is paid to underwriters in the US IPOs. 

e)      What do you understand by ‘price-stabilization’ activities conducted by the underwriter(s)? Do you think the underwriters were involved in price-stabilization of the Ferrari IPO?

In the recent market, the stabilization manager of the company is purchasing a portion of company shares are two listings in the stock market. There are many investors that are performing the role of stabilization managed to who support the new IPOs in the stock market? There are some measures that will continue to support the share price and the managers top sporting the price of a stock. It is disturbed to companies are relatively overpriced to add. Investors are concerned that stock price may move to the adverse direction and end up the price stabilization. Prices stabilizer managers are an important aspect of the investment in the new market, and a Ferrari also involves such kind of stabilization. It is helpful to stable the price in the new market.

Question 4

Describe what happens during 'book-building' of an IPO. What price range was used for book-building of the Ferrari IPO? Why do you think Ferrari priced its offering at the top end of the book-building range?

Book building is a process which is adopted by underwriting to attempt different kinds of efforts to determine the price at an initial public offering. Generally, an underwriter normally invests in a bank and build the book by investing different institutes to submit bids for different numbers of shares and prices. Book building processes comprises different stages, such as issuing company higher investment bank to act as an underwriter and invite investor to invest on a large scale. The book is built by listing different kinds of aggregate demand for the issuance of bids and the underwriting analysis. The deal of victory of automobiles is based on the necessity inductive. To strengthen the border and in the IPO market, an investor said that in recent weeks IPO market has appeared to cool with some name brand and such expectations that opened prices indicated, added $48 two $52 per share. Ferrari did not immediately respond to the request of command, and it could be familiar to the other factors that are used to market (Schill & Craddock., 2017).

Question 5

Based on the information given in the case study and the IPO prospectus, discuss the pricing of the Ferrari IPO. Would you have invested in Ferrari at this price?

The information of case studies based on the IPO you better investment in the market. The initial public offering is a common share of Ferrari and is working approximately 4 nine percent of Ferrari share capital. The company is not selling common shares and not receives any kind of proceeding from the sales of common shares. The investment in common shares involved different kinds of risk. With that code exchange with the risk of the Securities and Exchange Commission of a regulatory body that will disapprove the Securities and other representation in the different offences (Giorgio, 2017). I would invest in the shares of Ferrari Company at this price because in future share prices of Ferrari will increase gradually that will be beneficial for me. Although, increase in future share prices will also increase return on investment.

Question 6

What are IPO lock-up agreements? Describe the lock-up agreement of the Ferrari IPO.

The IPO lock-up agreement is a professional contract and legal biding between underwriters and insiders of the company. In the IPO process, both parties draw a contract regarding the performance and sales of stock in the local or international markets. The initial public offering (IPO) represents the first sale of equity shares in the stock markets by the company. Considering the case study of Ferrari IPO, a lock-up agreement was also drawn by the Ferrari at the time of IPO.  Under this lock-up agreement, Ferrari Company has to take into consideration some conditions and rules about the pledge, offer, sell, dispose of, economic consequences, security convertibility, and transfer of shares. Although, the agreement also includes information regarding under-writing of stock.

Question 7

The diagram below shows the performance of Ferrari shares from October 2015 to September 2019. The first day of public trading of RACE shares was 21 October 2015. Shares were sold in the IPO at an offer price of $52. More information on daily share price movements is available in the Excel file (RACE share price).

Based on a visual examination of the chart above, how does the performance of the Ferrari IPO compare with average IPO performance documented by past empirical studies

i-                   in terms of the short term (1st trading day)?

The Race shares were offered at relatively higher prices than average share prices in the stock market. The IPO was offered at the selling price of $52 on 21st October 2015. Although, the share prices increased over the time as market value and demand for the equity shares of Ferrari Company increased. The visual examination is representing an inclining trend.

ii-                 and over the longer term (4 years)?

The long term trend of Race shares presented in the case study shows a gradual increase over the time duration. In 2015, the market  price of Ferrari Company’s share was 52 that increased up to 150 in 4 year duration. Conclusively, it can be said that almost 25% increase is recorded in the share prices of the company over a one-year duration. Somehow, the graph also represents a higher fluctuation in share prices during 2^nd to 4^th quarter of 2018. Such fluctuation and stock price volatility indicate that market values of offered shares are influenced by the external environmental factors and overall financial performance of the company in a fiscal year.

Question: 8

In the light of the main theories of capital structure, provide a discussion of the evolution of the capital structure of Ferrari since its IPO. You will find the Annual Report 2018 helpful in answering this question.

According to the analysis of the annual report, the IPO generated a direct impact on the equity portion of the company. In 2015, the company's equity increased from 2478 to 2599 by the decision of IPO. The equity is sub-divided into two categories after IPO: equity attributed to owners of the patent and equity attributed to non-controlling interest. Although, debt financing in the capital structure is decreasing over time. See the following figure from the annual report of the company.

Thus, based on the analysis it can be said that the capital structure of the Ferrari Company was changed because of IPO decision in 2015. The equity percentage in the capital structure was increased. Although, reduce in debt financing reduced the percentage of long term debt in the capital structure after IPO.