When Aston listed its shares on the stock markets in October 2018 the company was overvalued. As is the case with any new stock listing. You have to look at the stock markets as a rich man’s playground. The stock markets are made by the rich (be it individuals or corporations) and the stock markets are controlled by the rich. A new stock listing is a way of printing money, a quick cash N’ grab. It raises capital for the company and the company’s key players. So the Aston Martin key shareholders and the CEO (Andy Palmer) amassed a hefty payday for doing very little.
Since the stock market listing in 2018 Aston Martin share value has fallen 46% in value, or $1.8bn. The shares fell a further 21% on Thursday. The company revealed the flotation cost £136m GBP which pushed it into an annual loss of £79m GBP. This is where it gets crazy, £61m of the flotation cost was literally given away in share schemes and incentives, to pay off shareholders and advisory firms.
Almost certainly the executives would have rewarded themselves handsomely and then some. While this is not an uncommon practice when a company is newly minted on the stock market, it’s a sign of short-term management thinking. Cash N’ grab. And running a company in such a way will cause more disruption than Brexit.
Investors have said Aston Martin’s IPO has been an “abject failure”. Aston Martin’s market valuation was £4.3bn at the time of listing. As of today, the market valuation is £2.5bn GBP. Conversely, Aston Martin is selling more cars, special edition models are in high demand. However, the sales boom is ending.
Last week Aston Martin revised it’s sales figures as it warned on a reduced sales forecast from 7,300 to 6,500 units. UK and European demand has reduced by 17% and 19 % respectively. Dealers are ordering fewer cars due to low demand. Dealer sales in Asia Pacific and the US increased by 6%.
Earlier this year Aston Martin CEO (Andy Palmer) boasted that the 106-year-old company was weatherproof from Brexit uncertainty. Now he has changed his tune, blaming “macro-economic uncertainties and enduring weakness”. Roughly translated, this means Brexit.
So Aston Martin now faces the prospect of an empty bank balance. But it’s got a plan, it will borrow money and spend its way out of trouble… That’s not a very good plan but the only one available right now.