Ferrari ipo analysis

Requirements:

1. Read the attached files [Assignment questions, case study, company prospectus, RACE shareprice, annual report]

2. Answer all 8 questions in 3000 words count with no copy paste please

3. Cite any external reference in Harvard styleThe assignment is based on the following documents • • • • • A case study ‘Ferrari: The 2015 Initial Public Offering’ • Ferrari IPO prospectus • An Excel file containing daily share price of Ferrari since its IPO (RACE shareprice) • Ferrari’s Annual Report 2018 Read the above documents to answer the following questions. You may wish to use external references/material from credible sources (such as financial press, journal articles): 1. An IPO marks a strategic milestone for a company. (16 marks) (a) Explain the generic benefits and drawbacks of going public. (b) What may have motivated Ferrari (Ticker symbol ‘RACE’) to go public? (c) Why do you think Ferrari chose to list on New York Stock Exchange? (d) What can you say about the primary and secondary shares sold in the Ferrari IPO? 2. What is an IPO over-allotment (Greenshoe) option? Did Ferrari include such an option in its IPO? (6 marks) 3. The underwriting investment bank takes on a central role in the IPO process. (25 marks) (a) What are the key tasks executed by the underwriter? (b) What are primary considerations when selecting an underwriter? (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? (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? (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? 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? (10 marks) 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? (10 marks) 6. What are IPO lock-up agreements? Describe the lock-up agreement of the Ferrari IPO. (5 marks) 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 shareprice). 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. ii. in terms of the short term (1st trading day)? and over the longer term (4 years)? Past studies have suggested a number of explanations for short-run underpricing and long-run underperformance of IPOs. Discuss the ones which you think are relevant to Ferrari’s case? (16 marks) 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. (12 marks) Ferrari N.V. 2018 ANNUAL REPORT TABLE OF CONTENTS Page Board Report Board of Directors and Auditors Letter from Chairman and Chief Executive Officer Certain Defined Terms and Note on Presentation Selected Financial and Other Data Creating Value for Our Shareholders Risk Factors Overview Industry Overview 3 4 5 6 8 9 29 31 Overview of Our Business Operating Results Subsequent Events and 2019 Outlook Major Shareholders Corporate Governance Non Financial Statement Risk, Risk Management and Control Systems Remuneration of Directors 34 62 82 83 85 107 131 138 Financial Statements Consolidated Financial Statements and Notes at December 31, 2018 Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Cash Flows Consolidated Statement of Changes in Equity Notes to the Consolidated Financial Statements Company Financial Statements and Notes at December 31, 2018 Income Statement /