Within a few days, pieces of a certain transportation firm from Maranello will be floating around the strange, abstract realm of public finance. Ferrari’s IPO represents a kind of turning point for the company hitherto unseen, save for perhaps Fiat’s incremental purchase of larger and larger fractions and, of course, Enzo’s death in 1988. Fiat CEO Sergio Marchionne believes that the public offering has the potential to save Ferrari and also net a significant amount of needed cash for FCA. But will a public Ferrari be cutting its low, active-aero nose off to spite its face?
Ferrari has always been a pioneer in cultivating a brand that stands for more than its products. In particular, Enzo and Luca after him tried very hard to make Ferrari symbolize not just performance and style, but also a difficult-to-define kind of exclusivity. After all, this is the company that tells potential clients that their only entry option is to buy a used one, and the one that sells cars you need an invitation to buy.
Even recently, Ferrari fought growing sales numbers in order to protect the mystique of owning one of its cars. Sales were limited not by the market or production constrains, but by Ferrari’s leadership. Fiat CEO and Montezemolo successor Marchionne has advocated for increasing production, arguing that the business sense behind growing the company should trump Ferrari’s traditional policy of brand cultivation above all.
But the specter of increased sales is not the only threat to Ferrari as we know it. Ferrari’s cult of exclusivity isn’t just a sales tactic, it’s a product on its own. Across the world, people clamor for Ferrari-branded hats, shirts, pens, and even theme parks. It’s safe to say that even though the cars are exclusive, the brand itself is accessible to most. According to industry experts, Ferrari’s branding division alone is worth $1.5 billion even before the firm goes public.
As control over Ferrari, as a business and as a brand, spreads across global markets, it is likely that priorities will shift. What was once a company driven by dedication to its heritage and what it believed were Enzo’s wishes will now be an corporation that needs to perform at earnings calls and in annual reports. Whether this will mean substantial difference in how the company is run and what kinds of business it conducts remains to be seen.
Unfortunately, it may be the case that as Ferrari reprioritizes during the process of going public, beloved programs will be cut. I can’t imagine that shareholders will care about preserving heritage paint color choices, for example, or building crazy one-offs for kings of the blues or even of small oil-rich islands for that matter.
Ferrari’s IPO may usher in a new era of business for its brand licensing division, which will have plenty of cache to take advantage of for years to come despite any changes in business. It also might mean that Ferraris become more accessible and numerous in the world’s booming economies like China, Brazil, and India. What that will mean for the model line is hard to see from before the offering, but I think that Ferrari’s new stakeholders may be brazen enough to give these markets what they want. Growing markets want practicality and status, and the Ferrari CUVs we have dreaded just might be getting their chance to shine.
Still, while the threat of a Ferrari that bears little resemblance to the company with which we are familiar is palpable, there are somethings worth pointing out before we write the brand off as a total sell-out. When it comes to this public offering, the most important thing that you need to know is that the equity on the table amounts to less than a controlling interest. FCA, its shareholders, and the Ferrari family will retain most of the stock, and will continue to control most of the corporations actions.
In addition, it should be known that the company’s value as it stands rests by and large in its main business activities. That $1.5 Billion that makes up Ferrari’s branding activities is less than a fifth of the company’s likely $11 Billion valuation, and so it even seems that Ferrari’s seemingly counterintuitive focus on exclusivity seems to be paying off as is. Still, as the public offering approaches, we likely have good reason to think that if anything does change it’ll take some time. That said, we can only hope that Ferrari’s new owners across the planet don’t prioritize the bottom line so far above the starting line.