Chrysler and Fiat are denying Sergio Marchionne told analysts and potential investors they would be better served not investing in the Chrysler IPO if the smallest of the Big Three automakers completes a public offering of stock.
In a short release issued Thursday morning, Fiat said, "In response to various media reports, Fiat S.p.A./Chrysler Group strongly denies that Mr. Sergio Marchionne, Fiat CEO and Chrysler Group Chairman and CEO made comments regarding Chrysler Group that were attributed to him in a Sanford C. Bernstein report issued earlier this week."
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The denial comes less than 24 hours after Bernstein analyst Max Warburton summarized Marchionne's comments at a Bernstein conference as giving the impression the CEO doesn't truly buy into the value of a Chrysler IPO.
Warburton wrote: "Marchionne spoke at our recent Bernstein conference and made some positive comments on Chrysler's prospects. But he argued that while he believed Chrysler had an attractive future, he did not believe investing via this partial IPO would be the most attractive route for investors (implying investing via Fiat, or a future Fiat-Chrysler listing, would be more attractive)."
Fiat says that's not accurate. It says, "The report mischaracterizes Mr. Marchionne's presentation which was made at a Fiat investor meeting and does not accurately record his comments."
No roadshow yet
Three weeks after the Chrysler S-1 was filed, the banks running the partial IPO have yet to schedule a roadshow. That roadshow will be watched closely for a couple of reasons. First, it will give Wall Street a chance to dive further into the financials and future growth prospects for the automaker. Second, it will be a chance for analysts to see just how Marchionne handles the delicate position he finds himself in.
As CEO of Chrysler, Marchionne has to put the automaker and its growth prospects in the best possible light. At the same time, Marchionne has said in the past he does not think a partial IPO is the best option for growing Chrysler's business and making it a stronger automaker. He has said Fiat should buy all of Chrysler and then, when the time is right, issue a listing of Fiat/Chrysler shares.
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The problem for Marchionne is the UAW VEBA trust, which owns 41.5 percent of Chrysler and is issuing the 16 percent of Chrysler shares that will be sold to the public. The VEBA trust and Marchionne are billions apart on the value of the 41.5 percent of Chrysler Fiat wants to buy.
That's why the VEBA trust is pushing this IPO. It wants to see if the market agrees and values the automaker at a higher price than Fiat is willing to pay right now.
Given the differences between Marchionne and the VEBA trust, Warburton says, "This Boat won't Float."
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"While Marchionne will lead the roadshow and give a confident view on the value of Chrysler, the process surely won't run to its conclusion. Investors will probably be asked to indicate what they're willing to pay for Chrysler shares and this will provide an additional data point for negotiations with the VEBA. But the investment banks and lawyers involved in the process are unlikely to see the IPO completed," said Warburton.
"If any young bankers or lawyers working on the deal are reading this, here's some advice: quit staying up all night to run spreadsheets and proof documents. Down tools now and go home. This deal is unlikely ever to happen."
Questions? Comments? BehindTheWheel@cnbc.com .
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