The luxury sportscar maker is gearing up for a £4.5bn IPO on the London Stock Exchange (LSE). It comes after months, if not years of speculation on the move.
- Valuation aimed at around £4.5bn
- Shares opened yesterday at £19
- IPO to take place on 8 October
- IPO would confirm the turnaround after years of financial woes
How much is Aston Martin aiming for?
The famous British marque – permanently associated with 007 – has announced it plans to go public. The news comes after months of rumours and will make it the only carmaker to be listed on the London Stock Exchange.
The company intends to sell £925m in shares, which is about a quarter of its stock. A figure that could translate to a £4.5bn valuation. There was a recent revision in share price after analysts were sceptical about Aston Martin’s initial valuation estimates. The current valuation brings it closer to its only direct competitor listed, Ferrari.
CEO Andy Palmer has turned Aston Martin around since he joined in 2014. The Gaydon based company was hit hard by the crash back in 2008, with negative results up to as recently as 2016. However, it did manage to report £877 million in revenue and £77 million net profit in 2017. Aston has already reached £445 million in the first-half of this financial year. A figure that translates to an 8% year-over-year increase in revenue and 14% increase in adjusted EBITDA.
The move also comes months before the UK leaves the European Union. Palmer describes the carmaker is “well insulated” from a no-deal scenario. Nevertheless, the auto industry remains as one of the most exposed to post-Brexit trade and political barriers. This timing allows shareholders to cash out before a worst-case-scenario Brexit materialises.
Who owns Aston Martin?
The majority stakeholders are the Kuwaiti, Investment Dar and Italian based Investindustrial. The two consortiums are believed to own close to 80% of the company. Mercedes-AMG, who supply engines and infotainment technology to Aston, also own a 4.9% stake of the British marque.
Chasing after Ferrari – risk worth taking?
When Ferrari went public, it sold itself as a luxury investment, rather than a car maker, and trades in line with the luxury accessory maker, Hermes International. Traditional carmakers trade at about 2.5 times forward EBITDA. Ferrari – which has a history of strong profits and cash generation – trades at 20 times forward EBITDA. Given the proposed IPO valuation, it seems Aston Martin is positioning itself alongside their Italian competitor. Although the two automakers are indeed direct competitors, Aston doesn’t have quite the same investor appeal or strong financial history to show off.
Management is being incentivised massively with the IPO, making it easy to see why Aston is revving up. Investors have so far responded positively – even if some analysts remain on the back foot – giving it a boost in confidence regarding its price range. Still, would-be shareholders should be cautious of how potentially fragile the optimal plan execution conditions are to justify the price Aston Martin is asking.