Country : Jordan
Assignment Task :

Assignment Question: The 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 and the IPO book (e-copy available on Blackboard) to answer the following questions. You may wish to use external references/material from credible sources (such as financial press, journal articles): 

(i) An IPO marks a strategic milestone for a company. 

(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? 

(ii) What is an IPO over-allotment (Greenshoe) option? Did Ferrari include such an option in its IPO?  

(iii) The underwriting investment bank takes on a central role in the IPO process. 

(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?  

(iv) 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?  

(v) 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?  

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

(vii) 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).

 

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  • Posted on : May 18th, 2019
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