first_img — – Recommended Links Ferrari had a strong first day on the stock market… Yesterday, the Italian carmaker Ferrari (RACE) had its initial public offering, or IPO. An IPO is when a company sells shares to the public for the first time. Ferrari was looking to raise around $900 million. It planned to sell shares for $48-$52. Ultimately, the company settled on an opening share price of $52. This put the company’s valuation at $9.8 billion. •  Ferrari’s reputation as a luxury automaker helped it get a premium valuation… Yesterday, CNBC said Ferrari’s valuation falls somewhere between a high-end automaker and a luxury goods company: …[A]t $52 a share, the IPO valued Ferrari at around 14 times earnings before interest, taxes, depreciation and amortization (EBITDA). This puts it on medium ground between automakers like BMW, that have lower ratios, and luxury firms like Hermes and Cucinelli, which have higher ratios. E.B. Tucker, editor of The Casey Report, thinks Ferrari will have trouble living up to its lofty valuation. Following its strong public debut, Ferrari is now valued at nearly $10 billion. That’s a huge valuation for a company that prides itself on being exclusive. They only sell around 7,000 cars every year, and the cheapest new ones start at about $198,000. Last month, I went with Doug Casey to Canada to try to buy a $400,000 Ferrari. The dealer refused to sell it to him. The market for Ferraris is so high that they don’t need any more customers. Ferrari shareholders will want to see sales and profit growth. But Ferrari can’t grow by selling more cars…because selling too many cars will tarnish the brand. That means the only way for Ferrari to grow is by raising its prices. Ferrari’s steep valuation hasn’t scared investors away yet. Its stock price was up as much as 17% yesterday. It closed up 6%. •  Ferrari may have timed its IPO perfectly… Here’s what Doug Casey said in The Casey Report just days before Ferrari went public: Ferrari is going to have an IPO on its stock soon. A smart move on their part; when the ducks are quacking, you should feed them. I wouldn’t touch it if your broker offers you some… E.B. Tucker also thinks Ferrari’s owners are cashing out at the right time. The Ferrari IPO is a classic example of insiders unloading expensive shares on to the public at the end of a bubble… The mainstream media will tell you that companies go public because they need capital to grow. Sometimes, this is the case. But what you don’t hear is that most company founders and early backers see IPOs as a way to “cash out”…to sell part or all of their company’s shares to public buyers who are willing to pay a lot more than knowledgeable private buyers would. The public’s appetite for IPOs is biggest at market peaks. This is when the social mood is rosy. It’s when things look great. The guys who specialize in unloading stocks onto the public (investment bankers) know this. That’s why there is a rush to take companies private during market peaks (like we saw in the late 1990s). •  Going public now looks like a smart move… The Federal Reserve’s easy money policies have fueled one of the most powerful bull markets in U.S. history. The Fed dropped its key rate to effectively zero in December 2008. It hasn’t lifted it since. Rock-bottom interest rates make it cheap to buy stocks with borrowed money. That’s a big reason why the S&P 500 has gained 130% since December 2008. But prices for a lot of stocks are detached from reality. A popular long-term valuation metric called CAPE indicates that U.S. stocks are 49% more expensive than their historical average. Rickards: “This is the Biggest Accounting Hoax Since Enron” According to Jim Rickards, the fallout will be 525 times bigger than Enron and is sure to affect all American citizens — no matter where you live, what you do for a living or how much money you have. The mainstream media could uncover this deception anytime now. Once that happens, it will be too late for anyone to act. Will you be ready? Click here to find out the four steps you need to take to prepare for the coming chaos.last_img

Leave a Reply

Your email address will not be published. Required fields are marked *