There is certainly something special about a Ferrari (RACE). Although I’ve never owned one myself I’ve been a long-time addict of the the Alfa Romeo Spider which might be considered a “poor man’s Ferrari.” I do get the appeal of the car. My mechanic always has a few Ferraris on the floor of the shop and they even smell different than other cars!

The real reason a Ferrari is special is that they take customization to a level that makes it feel like you are designing and building your own car. This is somewhat hard to do at a global scale but it’s really in their DNA and what sets them apart. This is where the very high margins (and prices) come in. It matters though. Owners get a car that is uniquely theirs. In contrast if you spend $900K on a Porsche Spyder you basically get the same car anyone else has that ponies up the money.

Click image to see roadshow slides (PDF)

“Real Ferraris” are in the mid-six figure range with the very high end, highly-personalized and collectable editions costing upwards of $1M. The motto of the company isn’t growth but rather to “always sell one less car than the market demands.” Exclusivity is part of the key to value of the Ferrari brand. The closest thing they have to a mainstream car is the (very nice!) California T which will set you back over $200K.

But the IPO is more like a Chrysler K-Car. Ferrari is the king of the super-high-end sports car category. They have been selling a little over 7000 cars per year for the last three years running and generating revenues between 2.2B and 2.8B Euros. Margins for the last six months were 15% (EBIT) and 10% net. Growth however is limited by the company strategy of exclusivity and personalization. But the proposed price range for this IPO puts the company at a very lofty valuation. Furthermore the shares offered now will be swamped when the remaining 80% FCA stake is spun off in early 2016.

The deal itself is to offer 17M to 19M shares at $48 to $52 which is about 10% of the company. All the shares are secondary (coming from Fiat Chrysler). The remaining 80% owned by Fiat Chrysler (FCA) are to be spun off to existing FCA shareholders sometime in the earlier part of 2016. Anyone planning to own stock going into next year will want to keep in mind that these new shares will all be coming into the market at one time. Based on the very high valuation proposed the best way to play Ferrari is to buy some FCA. FCA (NYSE: FCAU) has jumped from $12 to $16 this month. Some of that is certainly in anticipation of the RACE offering but may still have more to go.