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Aston Martin shares skid on london IPO

Shares in luxury carmaker Aston Martin [AML] have continued to tumble across its first weeks of trading following a lacklustre IPO that valued the iconic British company at £4.3bn. Investors were left balking at the sale price, which gave the company a higher valuation than its more profitable rival, Ferrari. 

However, the company’s CEO, Andy Palmer shrugged off concerns about the poor start, telling the media: “We’ve taken 105 years to get an IPO. I don’t think we’re going to worry too much about what the initial shares are doing.” 

At an initial sale price of £19, the IPO gave Aston Martin a market capitalisation of more than 20 times its first-half earnings. The price has since slipped to around £15. 
Aston Martin is the first British carmaker to list since the 1980s. Peers such as Jaguar and Bentley have been bought up by multinationals.


Value of Aston Martin at IPO

The road has been a bumpy one. Aston Martin has gone bankrupt seven times in its century of history and it only recently escaped the red after finally reporting a profit in 2017, its first since 2010. 

But the current turnaround, led by former Nissan executive Andy Palmer, seems to be working. The new DB11, Vantage and DBS Superleggera have formed the foundations for future cars, and led to record sales last year. It has now been profitable for seven consecutive quarters.

Aston Martin has big plans. It will release one new core car, two special editions (like the Valkyrie) and at least one heritage model (like the DB4 GT) each year until 2022. It also plans to roll out its first ever SUV from a new manufacturing site in Wales that is expected to be up and running next year. It is also looking to lead the “ultra-luxury” electric-vehicle market. 

The imposition of custom checks and duties following Brexit would affect carmakers across the UK, but the British company dismissed concerns over tariffs, arguing its affluent customers can absorb additional costs. Aston Martin is also aiming to expand beyond the UK, with Asia expected to account for 25% of total sales in the coming years.

“We’ve taken 105 years to get an IPO. I don’t think we’re going to worry too much about what the initial shares are doing.” - Andy Palmer, Aston Martin CEO.

Some believe the timing of the IPO, in many ways unfortunate given the political uncertainty, gave its current shareholders a chance to cash in on their investment before the inevitable headwinds of Brexit. 

Despite its more expansive plans for the future, Aston Martin attracted a significant degree of criticism for its valuation, especially as its target in the run-up to floating had been £22.50 per share. 

CFO Mark Wilson said he was “comfortable” with this, but the company’s habit of capitalising R&D costs rather than putting them through its profit thereby flattering their headline numbers, irks analysts. On the other hand, that valuation is modest compared to the likes of Tesla, which is worth nearly $50bn.


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