Aston Martin is becoming a publicly traded company with an IPO that values the iconic British firm at over $5 billion, although its debut on the London Stock Exchange faced challenges.
The cherished automobile brand of the fictional British spy James Bond set its share price at £19.00 ($24.70), establishing a total valuation of £4.3 billion ($5.6 billion).
The final offering price reflects a 16% decline from the upper limit of Aston Martin’s initial price target, indicating skepticism among investors about the company’s market position relative to its Italian competitor, Ferrari.
During its debut, shares fell by nearly 5% in London trading.
By going public, Aston Martin is asking investors to put aside concerns regarding potential U.S. tariffs on foreign cars and the uncertainty aroused by Britain’s upcoming EU exit, which could disrupt its supply chains and market access.
Aston Martin, despite its past of bankruptcy, has now returned to a path of healthy profitability.
In 2017, it successfully sold over 5,000 vehicles, marking its best sales performance in nine years and generating record revenues of £876 million ($1.1 billion), a nearly 50% increase from the previous year.
The company’s earnings for the first half of this year indicate continued growth, with an 8% revenue increase compared to last year and a 14% rise in profits, as reported in last month’s figures.
In recent years, Aston Martin has aimed to leverage its luxurious brand. However, analysts at Bernstein identify several looming challenges.
They contend that the Aston Martin brand lacks the strength and prestige of Ferrari (RACE), which is reinforced by its extensive racing heritage and numerous Formula 1 championships. Furthermore, the British marque operates with tighter profit margins and has a concerning pattern of fluctuating sales.
Since the IPO funds are primarily meant for existing shareholders rather than for reinvestment into the business, Aston Martin executives may be overly reliant on the anticipated success of a forthcoming SUV.
“Given its financial situation and seemingly weaker demand, we find it hard to envision how Aston Martin could achieve profitability levels comparable to Ferrari,” Bernstein analysts observed recently. “We don’t see it getting anywhere near.”
Aston Martin’s shareholders include the parent company of Mercedes-Benz, Daimler (DDAIF), private equity firm Investindustrial, and investors from Kuwait.
UJ (London) First published October 3, 2018: 4:38 AM ET
