FCAU - Fiat Chrysler Automobiles

[gokou3]

Official source for option adjustment:

https://www.theocc.com/webapps/infomemos

 

(Use keyword FCAU to search)

 

I don't see anything on the adjustment yet.  May come later?

 

 

https://www.fcagroup.com/en-US/media_center/fca_press_release/FiatDocuments/2019/may/FCA_2019_FIRST_QUARTER_RESULTS.pdf

Finally, the sale of Magneti Marelli was completed on May

2, 2019, resulting in cash proceeds of €5.8 billion. The Board

of Directors approved an extraordinary cash distribution of

€1.30 per share, or approximately €2.0 billion, to be paid on

May 30, 2019 to shareholders of record on May 21, 2019,

with an ex-dividend date of May 20, 2019.

[TwoCitiesCapital]

Official source for option adjustment:

https://www.theocc.com/webapps/infomemos

 

(Use keyword FCAU to search)

 

I don't see anything on the adjustment yet.  May come later?

 

 

https://www.fcagroup.com/en-US/media_center/fca_press_release/FiatDocuments/2019/may/FCA_2019_FIRST_QUARTER_RESULTS.pdf

Finally, the sale of Magneti Marelli was completed on May

2, 2019, resulting in cash proceeds of €5.8 billion. The Board

of Directors approved an extraordinary cash distribution of

€1.30 per share, or approximately €2.0 billion, to be paid on

May 30, 2019 to shareholders of record on May 21, 2019,

with an ex-dividend date of May 20, 2019.

 

Will happen on the ex-date when the share price is also adjusted.

 

My only comment about the dividend was to reference the negative impact on options values from starting a REGULAR dividend. Wasn't concerned about the special dividend, but a regular dividend ISNT considered in adjusting options and therefore is a net negative yo the option holder who is relying on price appreciation of the shares with the headeind of a dividend now in their way.

[Wabash02]

FYI: Info on adjustment for special divvy

https://www.theocc.com/webapps/infomemos?number=45044&data-ipsquote-timestamp=201905&lastModifiedDate=05%2F16%2F2019+00%3A00%3A00

 

(I've attached if the link doesn't work.)

 

Thoughts:  I know how the ex-div stuff works, but base don the price action since the announcement/results, etc I really don't think the market is rationally pricing in the special dividend.  IE, sure it will drop Monday, but I would not be surprised to see FCAU trade back up to these levels relatively quickly, so with the options re-pricing down there might be a decent opportunity to buy some calls and have them re-price.  Any else feel this way?

45044_2.pdf

[Guest ajc]

 

Daniel Ruiz is perhaps the best auto analyst I know of from the past few years. Almost all his analyses, and the trends he's identified, have been dead on or at the very least roughly right.

If you don't follow his work, even just for the sake of a contrarian view, you're straight-up insane.

 

He's super concerned about auto stocks right now. Scroll back 8 weeks through his Twitter account (https://twitter.com/DRuizG80) and you'll see all the worrying data and opinions he's shared.

Auto investors seem to be picking up pennies in front of a steamroller right now.

 

 

[Castanza]

 

Daniel Ruiz is perhaps the best auto analyst I know of from the past few years. Almost all his analyses, and the trends he's identified, have been dead on or at the very least roughly right.

If you don't follow his work, even just for the sake of a contrarian view, you're straight-up insane.

 

He's super concerned about auto stocks right now. Scroll back 8 weeks through his Twitter account (https://twitter.com/DRuizG80) and you'll see all the worrying data and opinions he's shared.

Auto investors seem to be picking up pennies in front of a steamroller right now.

 

I've made some decent money the past few years shorting Ford. I've been following the subprime auto loan storm that's brewing but its quite difficult to come up with any time-frame which would help to establish any LEAP short positions. I haven't heard of Daniel Ruiz, thanks for sharing.

[fareastwarriors]

 

Fiat Chrysler and France’s Renault are reportedly in advanced talks to forge partnership

 

https://www.cnbc.com/2019/05/25/fiat-chrysler-and-frances-renault-plan-to-team-up-amid-changes-to-the-auto-industry.html

[Spekulatius]

 

Fiat Chrysler and France’s Renault are reportedly in advanced talks to forge partnership

 

https://www.cnbc.com/2019/05/25/fiat-chrysler-and-frances-renault-plan-to-team-up-amid-changes-to-the-auto-industry.html

 

Looks like we will hear something by a Monday. I liked the idea of a tieup with Peugeot better.

https://finance.yahoo.com/news/details-fca-renault-talks-set-121310593.html

[Guest ajc]

 

Daniel Ruiz recently did a long video discussion about why he's bearish on FCAU, GM, & F (best ignore the vast majority of DiMartino-Booth's macro opinions) - https://www.youtube.com/watch?v=BXJ1Xvmun80.

 

Also, Ruiz previously discussed his methodology here -

- a few years back.

 

Edmunds on falling residual values and the record number of US cars coming off lease this year - https://www.aftermarketnews.com/edmunds-record-number-of-americans-with-car-leases-ending-in-2019-will-face-significant-price-hikes/.

 

There's a graph of US auto loan delinquency rates underneath.

 

 

[merkhet]

 

Daniel Ruiz recently did a long video discussion about why he's bearish on FCAU, GM, & F (best ignore the vast majority of DiMartino-Booth's macro opinions) - https://www.youtube.com/watch?v=BXJ1Xvmun80.

 

Also, Ruiz previously discussed his methodology here -

- a few years back.

 

Edmunds on falling residual values and the record number of US cars coming off lease this year - https://www.aftermarketnews.com/edmunds-record-number-of-americans-with-car-leases-ending-in-2019-will-face-significant-price-hikes/.

 

There's a graph of US auto loan delinquency rates underneath.

 

Edmunds analysts say these price increases could also be another nail in the coffin of the sedan market, as the price gap between SUVs and cars has narrowed considerably since 2016 on some of the most popular vehicles. For example, in 2016, it cost $1,746 more on average to lease a Honda CR-V LX AWD than a Honda Accord LX, but now that CR-V is only $37 more over the course of a 36-month lease. In 2016, buyers would have had to pay an average of $2,318 more to lease a RAV4 LE AWD compared to a Camry SE, but now that RAV4 is only $1,313 more on average over a 36-month lease.

 

Doesn't that seem to go against Ruiz' thesis that folks will be more likely to go back to sedans?

[sleepydragon]

 

Fiat Chrysler and France’s Renault are reportedly in advanced talks to forge partnership

 

https://www.cnbc.com/2019/05/25/fiat-chrysler-and-frances-renault-plan-to-team-up-amid-changes-to-the-auto-industry.html

 

This should be good for the entire auto industry

[Guest ajc]

 

 

Daniel Ruiz recently did a long video discussion about why he's bearish on FCAU, GM, & F (best ignore the vast majority of DiMartino-Booth's macro opinions) - https://www.youtube.com/watch?v=BXJ1Xvmun80.

 

Also, Ruiz previously discussed his methodology here -

- a few years back.

 

Edmunds on falling residual values and the record number of US cars coming off lease this year - https://www.aftermarketnews.com/edmunds-record-number-of-americans-with-car-leases-ending-in-2019-will-face-significant-price-hikes/.

 

There's a graph of US auto loan delinquency rates underneath.

 

Edmunds analysts say these price increases could also be another nail in the coffin of the sedan market, as the price gap between SUVs and cars has narrowed considerably since 2016 on some of the most popular vehicles. For example, in 2016, it cost $1,746 more on average to lease a Honda CR-V LX AWD than a Honda Accord LX, but now that CR-V is only $37 more over the course of a 36-month lease. In 2016, buyers would have had to pay an average of $2,318 more to lease a RAV4 LE AWD compared to a Camry SE, but now that RAV4 is only $1,313 more on average over a 36-month lease.

 

Doesn't that seem to go against Ruiz' thesis that folks will be more likely to go back to sedans?

 

 

 

It does seem to, though I think later on they also suggest looking at the used market for buyers who can't afford new vehicles. I'm not sure it's the best written article ever, though the 4 million number does stick out for the impact it could have if those folks can't afford to upgrade fully.

I believe Goldman also recently wrote that the tariffs this year will mean the average American household will have $850 less to spend. That theoretically only makes Detroit's trucks even less affordable for this cohort.

 

The thing I found very concerning was from the long video with Ruiz where he explains how much the Detroit Three rely on very few vehicles, especially just those 1 or 2 high-margin trucks.

The F150 for example makes up 37% of Ford's total North American production. It's crazy how much F, FCAU, and GM, need to sell just 1 or 2 very expensive vehicles for so much of their earnings and my takeaway is that it looks like those 4 million people from 2019 might not provide many of the buyers they require.

 

 

 

[fareastwarriors]

Fiat Chrysler submits proposal for a merger with Renault

 

https://www.cnbc.com/2019/05/27/fiat-chrysler-submits-proposal-for-a-merger-with-renault.html

[gokou3]

Official PR:

https://www.fcagroup.com/en-US/media_center/fca_press_release/FiatDocuments/2019/may/FCA_SUBMITS_PROPOSAL_FOR_A_TRANSFORMATIVE_MERGER_WITH_GROUPE_RENAULT.pdf

 

[Parsad]

Official PR:

https://www.fcagroup.com/en-US/media_center/fca_press_release/FiatDocuments/2019/may/FCA_SUBMITS_PROPOSAL_FOR_A_TRANSFORMATIVE_MERGER_WITH_GROUPE_RENAULT.pdf

 

Now is the $2.5B Euro dividend in the deal on top of the $2B Euro dividend being paid out this week?  Plus the Comau shares on top of that.  Cheers!

[Parsad]

Official PR:

https://www.fcagroup.com/en-US/media_center/fca_press_release/FiatDocuments/2019/may/FCA_SUBMITS_PROPOSAL_FOR_A_TRANSFORMATIVE_MERGER_WITH_GROUPE_RENAULT.pdf

 

Now is the $2.5B Euro dividend in the deal on top of the $2B Euro dividend being paid out this week?  Plus the Comau shares on top of that.  Cheers!

 

So it looks like we get our:

 

- $2B Euro (1.46 USD/share) special dividend (from Magnetti deal) this week

- plus another $2.5B Euro (approx $1.75 USD) equalization dividend through the merger

- plus another $0.18 USD /share dividend in cash or Comau spinoff shares

- plus the $3.55 Euro / 5.328 merger exchange or $0.74 USD / FCAU share Renault annual dividend on June 19th! 

 

Cheers!

[Guest ajc]

 

Official PR:

https://www.fcagroup.com/en-US/media_center/fca_press_release/FiatDocuments/2019/may/FCA_SUBMITS_PROPOSAL_FOR_A_TRANSFORMATIVE_MERGER_WITH_GROUPE_RENAULT.pdf

 

Now is the $2.5B Euro dividend in the deal on top of the $2B Euro dividend being paid out this week?  Plus the Comau shares on top of that.  Cheers!

 

So it looks like we get our:

 

- $2B Euro (1.46 USD/share) special dividend (from Magnetti deal) this week

- plus another $2.5B Euro (approx $1.75 USD) equalization dividend through the merger

- plus another $0.18 USD /share dividend in cash or Comau spinoff shares

- plus the $3.55 Euro / 5.328 merger exchange or $0.74 USD / FCAU share Renault annual dividend on June 19th! 

 

Cheers!

 

 

Even after adding all that in, the stock looks like it's been flat for two years. Maybe not worth popping any champagne over. I remember when Jeep alone was estimated to be worth around $50b.

Glad I had a few great years owning it and sold shortly after Marchionne passed. May he rest in peace.

I think investors who held, probably underestimated just how much his force of will, operational bar-setting, ability to intelligently and persuasively tell the FCAU story, and incredible deal-making skills, contributed to the intrinsic value of the business and its share price.

 

 

 

[Spekulatius]

FIAT in Europe is up ~10.5%, Renault ~15%. It is nice that there is quite a bit of cash coming towards FCAU shareholders. Holding or selling, that’s the big question...

[John Hjorth]

There is certainly a positive market reaction for EXOR, too - up nicely ~6% in Milano.

[Pondside47]

I haven't looked into Renault in detail but Renault owns nearly 40% of Nissan, which by itself is probably all the market capitalization of Renault Group. I have a feeling Fiat is getting Renault business for free. This is going to be a fun ride if done right. I'm very much leaning towards holding. The Europe market has been in pretty bad shape, so the down side is limited. I still believe all the original thesis for investing in Fiat, things such as US union restructured out of bankruptcy, the team Marchionne was obsessed with building (see all his interviews going way back to 2010). I would be invested simply because I still believe in the Capital Junkie presentation.

[TwoCitiesCapital]

FIAT in Europe is up ~10.5%, Renault ~15%. It is nice that there is quite a bit of cash coming towards FCAU shareholders. Holding or selling, that’s the big question...

 

Yes.

 

As an American shareholder, we're subject to withholding tax which makes it less appealing though.

 

I sold all of my shares the day before the ex-date for last special dividend because the withholding tax would've been ~1-1.5% of the position value. Figured a guaranteed 1-1.5% headstart over holding the shares made it worthwhile to risk sitting out of it for a day. I happened to get lucky with the price falling 1-2% on the morning of the ex-date when I repurchased.

 

I imagine I'll do the similar acrobatics here OR simply roll the sale proceeds into EXOR now that an immediate buyout catalyst for FCAU is off the table and that it will take time for synergies to materialize. 

 

 

[compounding]

 

Official PR:

https://www.fcagroup.com/en-US/media_center/fca_press_release/FiatDocuments/2019/may/FCA_SUBMITS_PROPOSAL_FOR_A_TRANSFORMATIVE_MERGER_WITH_GROUPE_RENAULT.pdf

 

Now is the $2.5B Euro dividend in the deal on top of the $2B Euro dividend being paid out this week?  Plus the Comau shares on top of that.  Cheers!

 

So it looks like we get our:

 

- $2B Euro (1.46 USD/share) special dividend (from Magnetti deal) this week

- plus another $2.5B Euro (approx $1.75 USD) equalization dividend through the merger

- plus another $0.18 USD /share dividend in cash or Comau spinoff shares

- plus the $3.55 Euro / 5.328 merger exchange or $0.74 USD / FCAU share Renault annual dividend on June 19th! 

 

Cheers!

 

 

Even after adding all that in, the stock looks like it's been flat for two years. Maybe not worth popping any champagne over. I remember when Jeep alone was estimated to be worth around $50b.

Glad I had a few great years owning it and sold shortly after Marchionne passed. May he rest in peace.

I think investors who held, probably underestimated just how much his force of will, operational bar-setting, ability to intelligently and persuasively tell the FCAU story, and incredible deal-making skills, contributed to the intrinsic value of the business and its share price.

 

On the other hand, you probably should be popping champagne when capital allocation continues to improve and the company trades for a low single digit multiple.

 

A few years ago investors in FCA were “overestimating Sergio, putting too much emphasis on the jockey in a bad business”. Now it's the other way around. Surprisingly enough, the comments inevitably come after the stock has traded weakly for a period of time. Go figure.

[Guest ajc]

 

 

On the other hand, you probably should be popping champagne when capital allocation continues to improve and the company trades for a low single digit multiple.

 

A few years ago investors in FCA were overestimating Sergio, putting too much emphasis on the jockey in a bad business. Now it's the other way around. Surprisingly enough, the comments inevitably come after the stock has traded weakly for a period of time. Go figure.

 

 

 

So the guy who boasts about being able to average down into an auto stock 10 years into a SAAR recovery even though residual values are falling, inventory levels are super high, truck sales are declining, consumers are stretched, auto defaults are soaring, and every great investor in history has warned strongly against owning OEMs towards the tail end of a cycle, is saying Marchionne was overestimated by investors and didn't deserve a premium even though Chrysler and therefore Jeep wouldn't be owned by Fiat without him, Ferrari got priced at the extreme end of its range because of him, and he also turned a 3B euro company with 22B euros of gross debt into 60B euros worth of total market cap (including spin-offs) in just 14 years.

 

 

[compounding]

 

 

On the other hand, you probably should be popping champagne when capital allocation continues to improve and the company trades for a low single digit multiple.

 

A few years ago investors in FCA were overestimating Sergio, putting too much emphasis on the jockey in a bad business. Now it's the other way around. Surprisingly enough, the comments inevitably come after the stock has traded weakly for a period of time. Go figure.

 

 

 

So the guy who boasts about being able to average down into an auto stock 10 years into a SAAR recovery even though residual values are falling, inventory levels are super high, truck sales are declining, consumers are stretched, auto defaults are soaring, and every great investor in history has warned strongly against owning OEMs towards the tail end of a cycle, is saying Marchionne was overestimated by investors and didn't deserve a premium even though Chrysler and therefore Jeep wouldn't be owned by Fiat without him, Ferrari got priced at the extreme end of its range because of him, and he also turned a 3B euro company with 22B euros of gross debt into 60B euros worth of total market cap (including spin-offs) in just 14 years.

 

The last time a read a sentence that long was in The Origin of Species. Thanks for that, gave me a pleasant flashback.

 

I’m not sure what your point is exactly. I think you’re trying to say that macros in some ways have been better than they are right now and that Sergio was a great CEO. I agree with both those statements.

[Scunny Bunny]

Gee Compounding, you are a harsh judge!

 

Look at FCAU from Exor's viewpoint. In June 2016, they had 449m FCA shares valued at $2919m. If this deal goes through, they will have had a $651m dividend (ex-parts biz), $808m dividend equaliser for Renault, $72m spin from Camau, and hold 43.3m RACE valued at $6,248m, plus still have the FCA shares (dividend adjusted = $12.05) worth $5,412. So today's value = $13,191. 350% uplift in three (and a half let's say) years. I'll take that thanks - ~54% IRR.

[Guest ajc]

 

 

 

On the other hand, you probably should be popping champagne when capital allocation continues to improve and the company trades for a low single digit multiple.

 

A few years ago investors in FCA were overestimating Sergio, putting too much emphasis on the jockey in a bad business. Now it's the other way around. Surprisingly enough, the comments inevitably come after the stock has traded weakly for a period of time. Go figure.

 

 

 

So the guy who boasts about being able to average down into an auto stock 10 years into a SAAR recovery even though residual values are falling, inventory levels are super high, truck sales are declining, consumers are stretched, auto defaults are soaring, and every great investor in history has warned strongly against owning OEMs towards the tail end of a cycle, is saying Marchionne was overestimated by investors and didn't deserve a premium even though Chrysler and therefore Jeep wouldn't be owned by Fiat without him, Ferrari got priced at the extreme end of its range because of him, and he also turned a 3B euro company with 22B euros of gross debt into 60B euros worth of total market cap (including spin-offs) in just 14 years.

 

The last time a read a sentence that long was in The Origin of Species. Thanks for that, gave me a pleasant flashback.

 

I’m not sure what your point is exactly. I think you’re trying to say that macros in some ways have been better than they are right now and that Sergio was a great CEO. I agree with both those statements.

 

 

Haha. Your initial post said investors overestimated him. That's clearly BS. The guy was a GOAT CEO with a 20%+ annualized CAGR over 14 years which incredibly included handling the worst auto industry crisis any of us may see in our lifetimes. When news of his illness got out, the stock dropped by around 20% in the following weeks. It hasn't come close to recovering since. Your original assessment of him is ridiculous based on his career record, plus the way investors started valuing the business after he was incapacitated.

 

Your statement that "macros in some ways have been better than they are right now" also sounds recklessly euphimistic. Inventory levels for the highest margin trucks across the Detroit Three are at record highs (

). Auto delinquency rates are at GFC levels (image below). Sales of the trucks that provide huge chunks of FCAU's, GM's, and F's, EBITDA are falling rapidly (https://twitter.com/DRuizG80/status/1129032612012527617). Over 4 million Americans will turn in leases in 2019, but residual values have dropped so much that many will only be able to afford used vehicles (https://www.aftermarketnews.com/edmunds-record-number-of-americans-with-car-leases-ending-in-2019-will-face-significant-price-hikes/). And these same potential buyers, will also have $830 per household less to spend this year because of tariffs (

).

 

The fact that we are 10 years into a SAAR expansion and you treat residuals, auto loan defaults, inventory levels, interest rates, used car values, consumer spending power, and other factors that are vital to new truck sales and therefore the margins of the Detroit Three, as some minor academic afterthought, sounds like a bad joke and some truly amazing complacency on your part.

Finally, if you're going to attempt to smarmily criticize my sentence structure at least check your own spelling first. Screwing up something like that could well lead people to reasonably question your ability to conduct intelligent and accurate due diligence.