FCAU - Fiat Chrysler Automobiles

[LC]

Bummer, looks like they'll just be reissued. Thanks peter.

[ZenaidaMacroura]

Bummer, looks like they'll just be reissued. Thanks peter.

 

Fiat has determined not to exercise its right to offer on the market the residual shares with respect to which cash exit rights were exercised and therefore, subject to the merger becoming effective, the purchased shares will be delivered to purchasing shareholders against payment of the cash exit price on the settlement date

 

I thought the quote I provided meant they weren't going to issue them as originally planned via the Reuters quote?  Or is the release today that I cited above just excess verbiage meaning they won't reissue said shares now, but instead wait to reissue after nyse listing?

[investor-man]

Bummer, looks like they'll just be reissued. Thanks peter.

 

Fiat has determined not to exercise its right to offer on the market the residual shares with respect to which cash exit rights were exercised and therefore, subject to the merger becoming effective, the purchased shares will be delivered to purchasing shareholders against payment of the cash exit price on the settlement date

 

I thought the quote I provided meant they weren't going to issue them as originally planned via the Reuters quote?  Or is the release today that I cited above just excess verbiage meaning they won't reissue said shares now, but instead wait to reissue after nyse listing?

 

The way I interpret everything is that Fiat bought up all the extra shares, but when the IPO on Monday, they'll just release those shares back into the market, so there is a net zero gain on the buy back.

[widenthemoat]

Bummer, looks like they'll just be reissued. Thanks peter.

 

Fiat has determined not to exercise its right to offer on the market the residual shares with respect to which cash exit rights were exercised and therefore, subject to the merger becoming effective, the purchased shares will be delivered to purchasing shareholders against payment of the cash exit price on the settlement date

 

I thought the quote I provided meant they weren't going to issue them as originally planned via the Reuters quote?  Or is the release today that I cited above just excess verbiage meaning they won't reissue said shares now, but instead wait to reissue after nyse listing?

 

I would agree with the latter Zenaida. I should have supplied the full quote on my first post but it suggests that they are only cancelling them due to Italian Law. I am not sure if that is accurate or not but that would make the most sense to me.

 

Fiat said on Thursday it was left with around 53.9 million shares from investors who decided to sell out and not be part of the company's merger into FCA. The carmaker will not offer those shares on the market and will pay the cash exit price of 7.727 euros ($9.845) for each of those shares.

 

Under Italian law, those remaining shares have then to be cancelled, but could be reissued, Marchionne has said.

 

"We will sell the equivalent of those shares on Wall Street," Marchionne said at the Paris auto show last week.

[gokou3]

The way I interpret everything is that Fiat bought up all the extra shares, but when the IPO on Monday, they'll just release those shares back into the market, so there is a net zero gain on the buy back.

 

I guess Fiat could even lose money if they sell these shares at a lower price than they bought it?  This seems likely if they are looking to immediately sell the shares upon NYSE listing.

[investor-man]

The way I interpret everything is that Fiat bought up all the extra shares, but when the IPO on Monday, they'll just release those shares back into the market, so there is a net zero gain on the buy back.

 

I guess Fiat could even lose money if they sell these shares at a lower price than they bought it?  This seems likely if they are looking to immediately sell the shares upon NYSE listing.

 

I for one hope the shares skyrocket once they hit the NYSE  ;)

[LC]

Why would that be the case? I never understood why listing on a different exchange would cause increased buying. I would love to be wrong but doesn't anyone who wants to buy Fiat able to do so already?

[investor-man]

Why would that be the case? I never understood why listing on a different exchange would cause increased buying. I would love to be wrong but doesn't anyone who wants to buy Fiat able to do so already?

 

I suppose my response is: why wouldn't that be the case? Presumably you bought the shares because you thought Mr. Market is crazy for valuing Fiat so low, so why wouldn't something as dumb as relisting on another exchange have the irrational effect of increasing the share price?

[LC]

Never underestimating the level of stupidity in the world is definitely true, but I think there are stronger reasons for not buying fiat shares than the listing. High debt levels, capital intensive industry, company transition, brand viewed as euro-centric, etc. But I am hoping you are correct :)

[sleepydragon]

Why would that be the case? I never understood why listing on a different exchange would cause increased buying. I would love to be wrong but doesn't anyone who wants to buy Fiat able to do so already?

 

I think it definitely will make a difference. many institutional fund manager who are only allowed to invest in US stocks will buy. the money allocated to US region is a multiple of the size allocated in Europe for most institution money managers. europe investors will be selling but us investor will buy. sometimes, they are forced to buy, especially when fiat is added to us indices. also, when stocks become more liquid, their price should be higher, which is called liquidity premium :)

[fareastwarriors]

Fiat Chrysler Dives Into New York Markets

 

Corporate Reorganization Spurs U.S. Share Listing

 

 

http://online.wsj.com/articles/fiat-chrysler-dives-into-new-york-markets-1412885503?mod=WSJ_hp_LEFTWhatsNewsCollection

[gokou3]

Why would that be the case? I never understood why listing on a different exchange would cause increased buying. I would love to be wrong but doesn't anyone who wants to buy Fiat able to do so already?

 

I think it definitely will make a difference. many institutional fund manager who are only allowed to invest in US stocks will buy. the money allocated to US region is a multiple of the size allocated in Europe for most institution money managers. europe investors will be selling but us investor will buy. sometimes, they are forced to buy, especially when fiat is added to us indices. also, when stocks become more liquid, their price should be higher, which is called liquidity premium :)

 

Yes, this is a reason why I asked the board about S&P500 eligibilty a few days ago.  Not only there is a lot of money in the S&P500 ETF, a lot of the US domestic mutual funds are essentially S&P500 trackers with slight variations.  As of now, one can buy Fiat shares only in the OTC market within the US.  Many funds are restricted to holding stocks traded on the big boards.

[ZenaidaMacroura]

Had fiat previously planned to also sell their 34million or so treasury shares into the NYSE listing?

[investor-man]

Had fiat previously planned to also sell their 34million or so treasury shares into the NYSE listing?

 

Yes

[peter1234]

Had fiat previously planned to also sell their 34million or so treasury shares into the NYSE listing?

 

Yes

 

Agreed.

 

If they just wanted to buy back shares they would not have made a big thing about capping the amount of exiting shareholders.

 

;)

[compounding]

A buyback is extremely unlikely given today's balance sheet and the five year plan that includes massive capex and debt reduction. As pointed out above, they are also selling treasury shares with the IPO. Heck, one of the main worries with FCA seems to be that they might be forced to a capital increase to fund the business plan, which Marchionne recently denied, for now.

 

Will the share bounce on the IPO? Won't they? I can't seem to comprehend the amount interest in what I consider to be inherently unpredictable, and largely inconsequential events versus the interest in matters that should be of interest if you are a business-oriented fundamentals based investor, like the actual business.

[ZenaidaMacroura]

Had fiat previously planned to also sell their 34million or so treasury shares into the NYSE listing?

 

Yes

 

Agreed.

 

If they just wanted to buy back shares they would not have made a big thing about capping the amount of exiting shareholders.

 

;)

I am not operating under the assumption that a large buy back is forthcoming...  As compounding said, The 34m shares I am citing are different from the 54million shares that they bought in conjunction to the merger.  Similarly, you could argue that if they had intended to reissue the shares, they would not make such a big thing about capping the amount of exiting shareholders.  I think the cap has solely to do with Italian law.

 

Heck, one of the main worries with FCA seems to be that they might be forced to a capital increase to fund the business plan, which Marchionne recently denied, for now.

Emphasis mine, was what I was getting at. 

 

Stuff like this article (read the title: Fiat Chrysler won't seek more capital to fund growth plan, Marchionne says): http://www.autonews.com/article/20141002/OEM/141009919/fiat-chrysler-wont-seek-more-capital-to-fund-growth-plan-marchionne

 

Conflicts with content in the article:

Marchionne said, however, the board of the newly-merged company would examine all capital-boosting options, including taking on more debt, a mandatory convertible bond and a possible capital increase, at the end of the month.

 

 

[compounding]

Yeah, the treasury shares are separate from the exit rights shares, and my understanding is they will all be sold in relation to the IPO. Marchionne also previously announced they will be selling their remaining stake in CNHI.

 

I believe the possiblity of a capital increase is subject to a board decision, hence the "end of the month"-comment. Marchionne himself has for he last 6 months or so been outspoken about the irrationality of issuing equity at current market prices, so I guess what he's trying to say is that he doesn't believe issuing equity is needed (or smart) right now, but it's not solely in his hands, nor does he want to rule options out if circumstances would change.

 

Lastly, Elkann said a couple of months ago that Exor wouldn't mind putting more money into FCA, but Marchionne denied it as FCA doesn't need it. Which is comforting for several reasons, I guess.

[merkhet]

I don't think he has to issue equity to raise capital.

 

I suspect that he can get more than enough capital partially selling parts of the company that are likely to be fairly- or even over-valued by the market. For instance, I could see him IPO-ing 49% of Ferrari to the open market.

 

So long as the market value and/or intrinsic value of Fiat will increase at a greater clip than the market value and/or intrinsic value of Ferrari, it would then be possible to re-fold Ferrari into the Fiat company by purchasing them for Fiat stock down the line.

[fareastwarriors]

Looking For Ferrari’s Lost Spark

 

http://blogs.wsj.com/corporate-intelligence/2014/10/10/looking-for-ferraris-lost-spark/?mod=WSJBlog&mod=WSJ_corp_intel

[karthikpm]

http://www.ft.com/cms/s/0/8d43adb0-508b-11e4-9822-00144feab7de.html

 

 

[compounding]

I don't think he has to issue equity to raise capital.

 

I suspect that he can get more than enough capital partially selling parts of the company that are likely to be fairly- or even over-valued by the market. For instance, I could see him IPO-ing 49% of Ferrari to the open market.

 

So long as the market value and/or intrinsic value of Fiat will increase at a greater clip than the market value and/or intrinsic value of Ferrari, it would then be possible to re-fold Ferrari into the Fiat company by purchasing them for Fiat stock down the line.

 

Yes, this is a pretty fundamental part of the thesis in terms of downside protection for me as well.

[karthikpm]

Anyone know why FIATY is trading higher than FCAU ?

 

[merkhet]

No idea why FIATY is trading differently than FCAU. Honestly, not sure why it exists anymore given that FCAU is trading on the NYSE.

 

http://www.bloomberg.com/video/fiat-chrysler-s-nyse-debut-exposes-weakness-niedermeyer-2dE72HhqS6SowpYd9VbkVw.html

 

The above is probably the general view of Fiat in the market. I suspect it's wrong, but that's probably what most people in the market think about Fiat right now.

[krazeenyc]

No idea why FIATY is trading differently than FCAU. Honestly, not sure why it exists anymore given that FCAU is trading on the NYSE.

 

http://www.bloomberg.com/video/fiat-chrysler-s-nyse-debut-exposes-weakness-niedermeyer-2dE72HhqS6SowpYd9VbkVw.html

 

The above is probably the general view of Fiat in the market. I suspect it's wrong, but that's probably what most people in the market think about Fiat right now.

 

I think it was general market inefficiency.  FIATY was trading at a 3-4% discount -- then at a 3-4% premium. My understanding is that by tomorrow your FIATY shares will be replaced by FCAU.