Ferrari’s stock has officially gone live, with shares opening at $60 Wednesday before scaling down to $56 following the initial hype. The $60 opening price exceeded Fiat-Chrysler’s expectations by 15.4
Percent and is still well above the predictions, trading for $56.09 at the time of writing.
Stock market analysts expected the initial demand for Ferrari shares to drive the price up, as demand for the 17.18 million available far exceeded supply. Some aren’t confident in the longevity of Ferrari shares, however, with The Wall Street Journal publishing a brief Op-Ed Tuesday titled ‘Why Ferrari’s Motor Runs Too Rich’.
WSJ believes the high initial price of Ferrari shares, along with the automaker’s desire to keep itself as exclusive as possible, could negatively affect its trading strength going forward. It argues Ferrari’s low annual production of just 7,000 units, which is purposely limited in order to maintain the exclusivity of its cars, caused it to “miss out on the near double digit annual volume growth,” achieved by BMW and Audi in recent times. However Ferrari’s success is directly related to its exclusivity, so comparing it to BMW or Audi is hardly fair.
There is a slight problem with Ferrari’s plan, though. It plans to produce up to 9,000 units a year by 2017. The automaker is exempt from U.S. emissions regulations so long as it produces less than 10,000 units a year, so it will eventually stagnate at that production volume or be forced to eschew some of the emotion and performance its cars are known for in favor of efficiency.
Annual production levels may be irrelevant if Ferrari can maintain high profits, something the automaker has never had a problem doing. WSJ says this is negated by the fact that it spends 20 percent of its revenue on research and development in order to stay ahead of the competition (5 percent is the industry average), though the company could begin to control costs based on its new shareholders’ desires.
WSJ concludes the “rocket-like ride Ferrari drivers are accustomed to,” may elude investors, but its easy to doubt their predictions based on the company’s performance in its first day on the stock exchange.