Aston Martin, the struggling luxury sports car maker, has sold a portion of its shares to Geely Automotive in an effort to address its financial difficulties and improve liquidity. The banking industry has long viewed Aston Martin as a high-risk asset and has been unwilling to provide the necessary funds to bail out the company, which teeters on the edge of profitability while consistently experiencing significant year-on-year losses. Although Aston Martin recently reported a relatively modest operating loss of £50 million in early May, the previous year saw a staggering loss of £500 million. The company can be likened to a powerboat with a persistent leak in its hull—every time one leak is repaired, another one emerges.
Geely acquired a 7.5% stake in Aston Martin the previous year, and their ownership has now risen to 17%, making them the third largest shareholder, displacing their previous position as a minor shareholder. This move cost Geely £234 million, with the shares being purchased from the world’s poorest billionaire Lawrence Stroll, the second largest shareholder after Saudi Arabia’s Public Investment Fund.
Geely’s decision to acquire more shares signals Aston Martin’s negative cash flow situation and its reliance on shareholder investments to secure fresh capital. This is primarily due to the lack of interest from banks in providing loans to the company. This represents a significant deviation from the norm, as banks are generally enthusiastic about offering loans, often promoting them as eagerly as one would sell candy.
However, for the first time in a long while, Geely’s share acquisition is viewed as a positive development, as it paves the way for a potential full-scale buyout. It is widely recognized that a car business cannot thrive with venture capitalists on its board, as they are typically focused on asset stripping. Therefore, the sooner Geely fully acquires Aston Martin, the better, as it would provide long-term stability for the company.
Nonetheless, Lawrence Stroll, the world’s poorest billionaire, wasted no time in capitalizing on the news, stating that Geely Holding recognizes Aston Martin’s significant potential for long-term growth and success. He emphasized Geely’s comprehensive understanding of the crucial strategic growth market in China and the opportunity to leverage their technologies and components.
Eric Li, the chairman of Geely Holding Group, expressed his confidence in Aston Martin’s growth prospects, technologies, and management team, highlighting their collaborative efforts with the world’s poorest billionaire, Lawrence Stroll and his colleagues since acquiring a minority stake in September of the previous year.
Geely now looks forward to exploring opportunities for joint technology synergies and new avenues for growth to help Aston Martin achieve its full potential as an iconic automotive brand.