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FIAT Announced Ferrari’s IPO

29 October 2014 by lberuti

The reporting season is in full on both side of the Atlantic, and it has been a fairly positive one so far. The beat/miss ratio compared with analysts’ expectations looks favourably compared to historical standards, but most of the results releases have been considered as non-events, and they generally failed to move the market one way or the other. A few names stood out though, and were subject to a burst of volatility. Take FIAT for instance. Their earnings today were a non-event as they reiterated their guidance, however they also announced that they are planning to spin off 90% of Ferrari. They will IPO 10% of the company and distribute the remaining 80% to (Fiat Chrysler Automobiles shareholders. When the headlines hit the tape the 5 year risk premium traded aggressively tighter, down 25bps. But when the full story emerged, investors were quick to bid it up, as it essentially looks like they are giving the family jewels away to shareholders. The 5 year CDS eventually closed only 9bps tighter.