What Does Ferrari’s IPO Mean For Tesla and Apple?

Ferrari’s IPO is sobering news for Apple Inc. (NASDAQ:AAPL), whose CEO recently said there will be ‘massive change’ coming to the auto industry in the coming years. Experts believe Apple Inc. (NASDAQ:AAPL) is working on a smart car that could come onto the market as early as the end of the decade. Apple has been aggressively poaching talent from Tesla and is rumored to have many of its top employees working on a next generation car product. For a company Apple’s size, the smart car is one of the rare product categories that could still move the revenue needle, although given Ferrari’s valuation, a successful ‘iCar’ might not increase Apple’s market capitalization by much. The luxury end of the vehicle market that Apple will presumably occupy isn’t worth very much relative to Apple’s market capitalization. Ferrari is worth $10.39 billion and BMW is worth $57 billion. Assuming Apple’s smart car division does as well as BMW and Ferrari combined, Apple would only be increasing its market capitalization by 10.4%. The car manufacturing business is simply too limited in the luxury end and too low margin in the mass segment end to make a big impact on Apple’s bottom line.

Ferrari NV (NYSE:RACE)’s successful IPO is certainly good news for Fiat Chrysler Automobiles NV (NYSE:FCAU), which still owns a significant chunk of the luxury company. If Ferrari stock rises, Fiat Chrysler’s book value will increase. Among Fiat Chrysler Automobiles NV (NYSE:FCAU)’s top shareholders and early believers is Mohnish Pabrai, which owned 13.2 million shares worth $200.52 million at the end of June, and his friend Guy Spier of Aquamarine Capital, which owned 2 million shares worth $25.95 million at the end of September.

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