When Does A Motorcycle Company Do An IPO?
Posted by Mike Werner on Mar 1st 2016
| Many companies in the world go to the stock market to raise hard needed cash for expansion. An IPO (Initial Public Offering) is the way a company can raise millions, even billions, of money. In return, they’ll give the investors dividend (a percentage of the revenue) and hope that the stock price rises, meaning that the company is valued higher and higher (and their executives get stock-options meaning they can become filthy rich). |
| Sounds good? If this is the case, why doesn’t every company, including the small mom & pop bakery on the corner go to the stock market? |
| The answer is simple: you do need to have a product that interests the public. Stock market traders (remember the movie “Wall Street”?) aren’t going to buy the stock in the company if there’s nothing interesting. If it has no future to increase their revenue, why bother? |
| Case in point: The Italian electric superbike manufacturer Energica Motors based in Modena, Italy. They have since 2010 been tinkering on a superfast electric superbike, and even made a race-only version that won several prizes. |
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| The Energica EGO is a technology masterpiece with a 136 hp engine developing 195 Nm at any rpm! It’ll do 0 to 60 mph in 3 seconds and has a top speed of 150 mph. So a very interesting sports motorcycle, if it weren’t for one thing: price! US$34,000! And of course the range of some 93 miles doesn’t help either. |
| In 2015, Energica sold a whopping 8 bikes – worldwide (no, that’s not a typo, EIGHT)! And this year, they plan to break an internal record by selling 244 bikes. But despite that, they did an IPO beginning of this year. |
| On the Italian stock exchange “Borsa”, they introduced their company at €3.20 per share on January 29th. The stock went up to €4.58 before dropping last week to €2.90. In other words, anyone who bought stock at the IPO is losing their shirt. |
| So? Was it worth it? They got some publicity, and some cash, but no even close to what they need to make more electric bikes, cheaper and with a better range. |
| At more or less the same time (a few months earlier), another company based in the same city of Modena, Italy also did an IPO. It’s a company you probably have never heard of; FERRARI. Now that’s a company that has been selling cars since eternity (created in 1939, last year they sold some 7250 cars). |
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| They did an IPO in New York, starting at US$52 per share. Last week they were trading at US$38. So not very interesting. |
| So if an blue-chip company with an incredible history and product can’t really make it on the stock exchange, why would a small, almost unknown, company like Energica? |
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Was it just a last ditch gamble? Or a calculated risk. Remember, doing an IPO cost a lot of money to the company. So was it worth it? You tell me. |
