Aston Martin has made its debut as a publicly traded automaker, achieving a market valuation exceeding $5 billion, though the initial trading day in London faced challenges.
The iconic car brand associated with the fictional British spy James Bond set its share price at £19.00 ($24.70), resulting in a total valuation of £4.3 billion ($5.6 billion).
This final share price is 16% lower than Aston Martin’s original forecast, highlighting investor skepticism about its comparison to Italian competitor Ferrari.
The shares fell nearly 5% during London trading.
As it goes public, Aston Martin is asking investors to set aside concerns about US tariffs on foreign automobiles and the potential disruptions to supply chains and markets stemming from Britain’s anticipated exit from the EU.
Despite a history of bankruptcy, Aston Martin is now reporting significant profits.
In 2017, the company achieved its highest sales in nearly a decade, moving over 5,000 cars and generating record revenues of £876 million ($1.1 billion), a nearly 50% increase year-on-year.
The upward trend continued in the first half of this year, with revenue rising 8% compared to the same period last year, and profits increasing by 14%, based on recently published data.
Recently, Aston Martin has been trying to leverage its premium brand identity. However, analysts at Bernstein identify several potential challenges.
They suggest that the Aston Martin brand lacks the strength and legacy of Ferrari (RACE), which benefits from years of racing heritage and numerous Formula 1 championships. Additionally, Aston Martin operates on thinner profit margins and has a history of inconsistent sales.
With IPO proceeds intended for current shareholders instead of reinvestment in the company, Aston Martin’s leadership may be overly reliant on the anticipated success of a new SUV model.
“Considering its current financial standing and seemingly weaker demand, we find it hard to see how it can achieve Ferrari’s level of profitability,” Bernstein analysts recently commented. “We believe it will struggle to get even close.”
Aston Martin’s ownership includes Mercedes-Benz parent company Daimler (DDAIF), private equity firm Investindustrial, and investors from Kuwait.
CNNMoney (London) Originally published on October 3, 2018, at 4:38 AM ET
Aston Martin has recently embarked on its journey as a publicly traded company with an initial public offering (IPO) that values the British automotive manufacturer at over $5 billion. However, the company faced a rough beginning on its first day of trading in London. Despite being iconic as the car brand associated with the fictional British secret agent James Bond, Aston Martin priced its shares at £19.00 ($24.70), leading to a total valuation of approximately £4.3 billion ($5.6 billion). This listing price was 16% lower than the maximum range initially targeted by the company, indicating investor skepticism about whether Aston Martin can be considered an industry peer to the renowned Italian luxury automaker, Ferrari.
Shares of Aston Martin experienced a nearly 5% decline during their first day of trading in London, further mirroring investor concerns. As the company transitions to public ownership, it is urging potential investors to set aside worries regarding US automotive taxation on foreign imports and the potential impact of Brexit on supply chains and market conditions. Despite its historical struggles, including multiple bankruptcy filings, Aston Martin has recently been posting solid profits. In 2017, the manufacturer reached a sales milestone of over 5,000 vehicles, marking its strongest performance in nearly a decade and resulting in record revenues of £876 million ($1.1 billion), reflecting a remarkable almost 50% increase from the previous year. Strong earnings for the first half of the current year also indicated that this upward trend was continuing, with revenue rising by 8% and profits increasing by 14% compared to the same period the prior year.
In an effort to boost its upscale image, Aston Martin has aimed to leverage its prestigious brand. Nevertheless, analysts at Bernstein have expressed uncertainties regarding the company’s prospects. They argue that Aston Martin’s brand strength pales in comparison to Ferrari’s, which benefits from a rich history in motorsports and numerous Formula 1 championships. This discrepancy is compounded by Aston Martin’s narrower profit margins and a concerning pattern of inconsistent sales. Analysts have indicated that the funds generated from the IPO are primarily intended for existing shareholders, as opposed to reinvestment in the company. This raises concerns about whether Aston Martin is overly reliant on the anticipated success of a new SUV model to drive future growth. Bernstein analysts have been critical, stating: “Given its current financials and apparently rather less robust demand, it’s a big stretch for us to see how it can possibly match Ferrari’s profitability.” They assert that they do not foresee Aston Martin approaching Ferrari’s profit levels.
The ownership structure of Aston Martin includes major stakeholders such as Mercedes-Benz’s parent company Daimler, the private equity firm Investindustrial, and investors from Kuwait. While Aston Martin’s IPO marked a significant milestone in its evolution, the apprehensions regarding its market valuation and competitive positioning reveal the challenges that lie ahead for the automaker as it navigates the automotive industry’s complexities, investor expectations, and the dynamic landscape shaped by broader economic factors like Brexit and trade policies. The company’s ability to establish itself firmly in the luxury auto sector and create a sustainable profitability model will be closely observed by stakeholders and industry experts alike. In essence, Aston Martin stands at a crossroads, striving for growth and stability as it steps into the public marketplace, with questions lingering over its future in the competitive luxury automotive arena.
