Aston Martin starts off in low gear after IPO
Aston Martin Lagonda was valued at £4.3bn by investors as the luxury car manufacturer floated on the London Stock Exchange on Wednesday, short of the £5bn that had been hoped.
Shares in the company, the first UK car maker to list in London since Jaguar in the 1990s, were priced at 1,900p apiece as part of the company's initial public offering. This was towards the lower end of the original 1,750-2,250p price range, which was recently narrowed to 1,850-2,000p.
Existing shareholders sold 57m shares, including former owners, Italy's Investindustrial, Kuwait's Adeem Investments and Primewagon, together with some senior management, representing 25% cent of the issued share capital. An over-allotment option of a further 5.7m shares are being made available by some of the shareholders, which would increase the free float to 27.5%.
Aston Martin, which is headquartered in Gaydon, Warwickshire, is expected to be eligible for inclusion in the FTSE UK Index Series but its initial market capitalisation would not enough for inclusion into the FTSE 100 as had been hoped last month.
Chief executive Andy Palmer, who last year year engineered the company's first profit since 2010, said the listing "represents a historic milestone" for Aston Martin.
"We are delighted by the positive response we have received from investors across the world and are very pleased to welcome our new shareholders to the register. We are excited about the momentum across the company and are fully focused on continuing to deliver our exciting growth strategy through the Second Century Plan."
Palmer's plan is for Aston Martin to deliver 6,200-6,400 cars this year, moving up a gear to 7,100-7,300 in 2019 and then he aims to shift this up to roughly 14,000 units annually in the medium term.
Recent demand has been strongest in the UK, US and China, with the average selling price up 11% to £160,000 per car, which helped push its first half profit for this year to £106m, helped by sales of the new Vantage and DBS models, as well as the existing DB11.
"The strike price may be a disappointment for the owners – it’s a long way short of the £22.50 talked about previously as the top of the range," said market analyst Neil Wilson at Markets.com. "But this is a fairer valuation when you compare with peers – notably Ferrari – and therefore this price could offer an in for longer term investors that the higher valuation would not have afforded."
Aston Martin’s net debt was £538.8m pounds, valuing the company at 23.6 times EBITDA on its debut.
As of 0846 BST, shares of Aston Martin were lower by 3.11% at 1,841p.
In the short term this sort of price action might suggest that the shares may have been priced at too high a level, said Michael Hewson at CMC Markets, but he noted that even Ferrari when it first floated in 2015 saw its share price fall 40% in the first six months of trading, from $50 to a low of just above $30 a share before rocketing higher since.
"Aston Martin is one of those brands that has had a turbulent existence, seven bankruptcies in over 100 years it has enjoyed a mystical cachet for those who have charted its tribulations from afar and have seen the cars venerated in a number of James Bond films from the DB5 which we first saw in Goldfinger in 1964 to the DB10 that we saw in Spectre most recently, and the V12 Vanquish with “adaptive camouflage” that was seen in Die Another Day, back in 2002. It also has a Royal Warrant, what other car company can claim to have one of them."
James Congdon at Quest, argued that the banks running the book for the IPO "have done a good job for their client - but there’s no bounce”.
He said the company's growth plans are "very aggressive" and so execution of that growth "needs to be flawless - nothing eats cash more than a car company when the cycle turns".