Fiat Chrysler shares slide on float debut

Shares in Fiat Chrysler went into reverse on their first day’s trading in New York yesterday, slipping from a high of $9.55 to $8.91 in early trade after listing at $9 each.

The IPO kick starts a five-year plan by the company’s veteran chief executive Sergio Marchionne that he hopes will complete his transformation of the company from a one-time struggling Italian car maker to a global powerhouse that also dominates in volume brands.

Marchionne has said he wants to step down in 2018, and with his track record of delivering results, he wants to leave a legacy that befits his reputation.

The renamed Fiat Chrysler Automobiles (FCA) arguably has a more impressive portfolio of brands than either Ford or General Motors – it now includes Ferrari, Maserati, Alfa Romeo, Jeep, Fiat, Chrysler and Dodge – but some investors are questioning where can it really dominate in volume brands.

Marchionne, ambitiously, hopes to increase worldwide sales 60% to more than 7 million cars and trucks by 2018. Fiat and Chrysler sold a combined 4.4 million cars and trucks last year, compared with 6.3 million by Ford and 9.98 million by Toyota.

Investors buying the Fiat Chrysler stock are gambling that having turned around Fiat, Marchionne can bring his midas touch to the combined company.

Sceptical analysts say he is trying to gain access for a car maker to the US capital markets at a tricky time, with the stocks of both General Motors and Ford recently hitting 52-week lows amid massive car recalls and safety problems.

Analysts also maintain that Marchionne will need to raise more capital, although he has played that down.

Fiat got management control of Chrysler about five years ago after it emerged from bankruptcy and got full control this year. It has combined all its businesses under Netherlands-registered FCA, which will also have a British domicile and operations centres in Detroit and Turin. The main listing will be in New York, with a secondary one in Milan.

That’s a complicated story for American investors, especially when you add in the controlling stake of the Agnelli family in Italy.

“Wall Street really misunderstands this stock,” said Morningstar analyst Richard Hilger, who feels the stock could be worth a punt – but only for the brave of heart.

“We think only investors willing to accept the risk of a turnaround company with a highly-leveraged balance sheet, operating in an industry that is cyclical, capital-intense, and highly competitive, should consider owning the shares.