Aston Martin shares tumbled 14 per cent after the loss-making carmaker priced its £576 million (€668 million) rights issue at a big discount to help it pay down debt.
The company will sell 559 million new shares at 103p each, a discount of 78 per cent on its closing price on Friday.
The four-for-one rights issue is part of Aston’s plan to raise £653 million (€758 million), a deal that involves bringing in Saudi Arabia’s Public Investment Fund as a major new investor. The company first announced plans for the rights issue in July.
On Monday, the business set out the pricing, which was “lower than expected and reflects the reservations that many investors will have about the midterm strategy”, said Charles Coldicott, an auto analyst at Redburn. He predicted that the company’s share price fall in recent months also meant it faced relegation from the FTSE 250 index in London later this year.
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Shares, which have lost more than two-thirds of their value this year, dropped by 14 per cent to 410.98p by late afternoon in London on Monday.
Aston Martin will use up to half of the proceeds to pay down existing debt, while also investing in new models.
The group had £1.3 billion (€1.5 billion) of debt at the end of June, and high interest payments have been one of the factors dragging down Aston’s profitability at a time when rivals Ferrari and Bentley have been reporting rising profitability.
The company also needs to invest in a new line-up of sports cars, as well as its first electric model, which the brand plans to release in 2025.
The company is yet to choose which electric technology it will use. The options include systems from Mercedes-Benz, which already sells Aston engines, electric start-up Lucid, which is backed by Saudi Arabia’s PIF, or one from the untested UK start-up Britishvolt. The group is due to make a decision on its electric partner later this year.
On Monday, Aston warned it was facing a “challenging operating environment, impacted by the war in Ukraine, Covid-19 lockdowns in China, as well as continued supply chain and logistics disruptions”.
The company’s losses in the first half of the year tripled to £285.4 million (€330.9 million), compared with £90.7 million (€105.1 million) a year earlier, in part because it had hundreds of unfinished vehicles waiting for parts from a supplier.
Roughly 45 per cent of the rights issue has been backed by the PIF sovereign wealth fund, major shareholder Mercedes-Benz, and owner Lawrence Stroll’s Yew Tree consortium.
The deal will mean Yew Tree’s holdings fall from 22 per cent to 18 per cent, while those of Mercedes will dip from 11.7 per cent to 9.7 per cent.
– Copyright The Financial Times Limited 2022
