RE: Aston Martin confirms its intention to go public

RE: Aston Martin confirms its intention to go public

Wednesday 29th August 2018

Aston Martin confirms its intention to go public

Gaydon's prospective IPO has been long in the making, and comes off the back of record profits



The prospect of Aston Martin going public has been a point of discussion for some time, but the manufacturer has now firmly set the ball rolling by filing a registration document with the Financial Conduct Authority - the prerequisite first step for any company considering an initial public offering.

Why now? Well, it certainly helps that last year the firm made its first profit since 2010, and expects to do even better this year (driven, in part, by sales of special edition models like the Vanquish Zagato and DB4 GT Continuation cars, according to the announcement). Aston can also justly claim to have its immediate future on a solid footing: its new plant in St Athan will open next year, and from it will emerge the Porsche Cayenne-rivalling DBX - widely expected to further boost sales in the medium term.

The launch of an SUV was at the cornerstone of Andy Palmer's plans for the brand when he took over as CEO in 2014. Flotation was probably high among his list of objectives, too - especially after Ferrari showed how splendidly it could work for a prestige car maker a year later. The IPO could see Aston valued at £5bn off the back of its expanded lineup and future prospects.


Why go public at all? The standard reason: money. Emerging from its reputation as a perennial loss-maker is all well and good, but Aston still requires significant cash flow to continue investment in its three-pillar product strategy - the famous Second Century Plan. The IPO would see a free float of at least 25 per cent of its shares, most from the Kuwaiti and Italian private equity groups that are the firm's majority owners.

Should it be valued in line with Aston's expectations, the company ought to find itself listed on the FTSE 100. Daimler will retain its 5 per cent stake. "We've got a very solid balance sheet now, very solid results. As we move into the third phase, which is the portfolio expansion, it also means we've got plenty of runway in front of us," Palmer explained to Reuters.

With a prospectus due to be published on September 20th, and pending a final decision, the manufacturer will hope to complete its flotation before the end of the year - handily ahead of Brexit. That's not a major hurdle for Aston, claims Palmer (only 25 per cent of its cars are sold in the EU) but provides further evidence nonetheless that the timing is nigh on perfect for Gaydon.

Author
Discussion

BigChiefmuffinAgain

Original Poster:

1,084 posts

99 months

Wednesday 29th August 2018
quotequote all
You have to be a massive ( or foolish ) optimist to value this company at £5B.

Profits last half year were £20.8M, only rising very slowly from £20.1M, so no great growth story.

The new range has not been that well received ( just look at the price drop on secondhand DB11's and/or Vantage reviews )

They are pinning a lot of their hopes on the DBX but the competition here has increased massively, with Bentley, Lamborghini, RR and soon Ferrari coming into the field.

They suffer from dis-economies of scale compared to all of the above.

And this is probably as good a time as ever to sell luxury cars - if you can't make money now, you never will ( and let's face it, their sales and nearly the company collapsed in 2008 )

Good luck to them....

TooMany2cvs

29,008 posts

127 months

Wednesday 29th August 2018
quotequote all

So they're moving into insurance, with a takeover of GoCompare?

Seem to be moving into every other market, with the flats and subs, so why not?

treeroy

564 posts

86 months

Wednesday 29th August 2018
quotequote all
In late 2000s / early 2010s i saw plenty of Aston Martins on the road. Now I don't think I have ever seen one of their new cars after the DB9/Vantage.

DJM7691

426 posts

110 months

Wednesday 29th August 2018
quotequote all
I for one am very pleased with Aston's relative up-turn and wish them every success for the future. It is amazing the difference in the organisation with a charisamatic, likeable leader who instills respect and hard work into the team there. I have firsthand knowledge of this and the difference between now and 5-8 years ago when Dr Bez was at the helm is like chalk and cheese.

The next 5 years will make or break Aston's long term future I feel, If the DBX and Lagonda launches go well and capture the imagination of the public, this could allow them to kick on in the way that the launch of the Cayenne and subsequent Macan led to Porsche achieving record profits.

Burwood

18,709 posts

247 months

Wednesday 29th August 2018
quotequote all
Except it isn't worth anything like £5B. Are we giving car companies Tesla excepted) dot com valuations now. That would represent 1% return on investment. Interesting that the entire company was valued at Euro 500M only 6 years ago.

treeroy

564 posts

86 months

Wednesday 29th August 2018
quotequote all
DJM7691 said:
I for one am very pleased with Aston's relative up-turn and wish them every success for the future. It is amazing the difference in the organisation with a charisamatic, likeable leader who instills respect and hard work into the team there. I have firsthand knowledge of this and the difference between now and 5-8 years ago when Dr Bez was at the helm is like chalk and cheese.

The next 5 years will make or break Aston's long term future I feel, If the DBX and Lagonda launches go well and capture the imagination of the public, this could allow them to kick on in the way that the launch of the Cayenne and subsequent Macan led to Porsche achieving record profits.
except they'll be like 3 times the price of those Porsches.

DJM7691

426 posts

110 months

Wednesday 29th August 2018
quotequote all
treeroy said:
DJM7691 said:
I for one am very pleased with Aston's relative up-turn and wish them every success for the future. It is amazing the difference in the organisation with a charisamatic, likeable leader who instills respect and hard work into the team there. I have firsthand knowledge of this and the difference between now and 5-8 years ago when Dr Bez was at the helm is like chalk and cheese.

The next 5 years will make or break Aston's long term future I feel, If the DBX and Lagonda launches go well and capture the imagination of the public, this could allow them to kick on in the way that the launch of the Cayenne and subsequent Macan led to Porsche achieving record profits.
except they'll be like 3 times the price of those Porsches.
Yep, but point still stands. If the models are successful, they can build a base which can give further investment into new products like the mid-engined 488/720S rival that has been mentioned.

Burwood

18,709 posts

247 months

Wednesday 29th August 2018
quotequote all
DJM7691 said:
treeroy said:
DJM7691 said:
I for one am very pleased with Aston's relative up-turn and wish them every success for the future. It is amazing the difference in the organisation with a charisamatic, likeable leader who instills respect and hard work into the team there. I have firsthand knowledge of this and the difference between now and 5-8 years ago when Dr Bez was at the helm is like chalk and cheese.

The next 5 years will make or break Aston's long term future I feel, If the DBX and Lagonda launches go well and capture the imagination of the public, this could allow them to kick on in the way that the launch of the Cayenne and subsequent Macan led to Porsche achieving record profits.
except they'll be like 3 times the price of those Porsches.
Yep, but point still stands. If the models are successful, they can build a base which can give further investment into new products like the mid-engined 488/720S rival that has been mentioned.
Except the market is only so big and a recession could kill them dead. Anyone who pays 100X earnings for Aston is a lunatic

wab172uk

2,005 posts

228 months

Wednesday 29th August 2018
quotequote all
Will be issued to investment companies at £X a share. Will go public after a week or so at a way inflated price. Investment companies will sell and make a profit, and the share price will fall, leaving private investors seeing losses straight away.

ReaperCushions

6,112 posts

185 months

Wednesday 29th August 2018
quotequote all
wab172uk said:
Will be issued to investment companies at £X a share. Will go public after a week or so at a way inflated price. Investment companies will sell and make a profit, and the share price will fall, leaving private investors seeing losses straight away.
Bingo.

Any member of joe public buying stock in the open market is a mug.

At that valuation, the only way will be down for a long time for the share price.

oilit

2,637 posts

179 months

Thursday 30th August 2018
quotequote all
Didn’t I read that they were going to offer existing customers stock at a ‘special’ price? How does that work? I assume if they did it would be a pre listing purchase?

TheDrBrian

5,444 posts

223 months

Thursday 30th August 2018
quotequote all
ReaperCushions said:
wab172uk said:
Will be issued to investment companies at £X a share. Will go public after a week or so at a way inflated price. Investment companies will sell and make a profit, and the share price will fall, leaving private investors seeing losses straight away.
Bingo.

Any member of joe public buying stock in the open market is a mug.

At that valuation, the only way will be down for a long time for the share price.
So how do we short them?

p1stonhead

25,741 posts

168 months

Thursday 30th August 2018
quotequote all
Valuation vs earnings seems crazy.

But Tesla is currently valued at some £50b.......

The market isnt always logical.

Maldini35

2,913 posts

189 months

Thursday 30th August 2018
quotequote all
So has the recent new product blitz, AMR models, racing programme, Valkyrie development, PR announcements re future models in new segments and big marketing investment been a massive gamble to raise the share price prior to an IPO?
I always wondered where the money was coming from.
Was it ever sustainable in the current business model or all predicated on a massive cash injection?
If they don’t raise as much as they forecast/need will everything start to unravel?
(I really hope not - I’m a big fan of AM)
Hopefully somebody who knows more about the business will explain - there’s usually somebody better informed on PH. smile








Edited by Maldini35 on Thursday 30th August 09:14

RobDown

3,803 posts

129 months

Thursday 30th August 2018
quotequote all
So much ignorance in one single thread. Steer clear of the stock market people until you can answer the following questions:

1. What’s a reasonable earnings base for AML? If you think it’s the highly distorted numbers from 2017, do not pass go, do not collect £200

2. Explain operational gearing. I’ll give you a clue, business growing it’s top line, cost base has a semi-fixed element. What happens to the bottom line?

I’m not saying £5bn is the right number. But at least start to think about this is a less than knee-jerk way

cidered77

1,632 posts

198 months

Thursday 30th August 2018
quotequote all
p1stonhead said:
Valuation vs earnings seems crazy.

But Tesla is currently valued at some £50b.......

The market isnt always logical.
there is ...i won't say "logic", but certainly "argument" to Tesla's valuation.

investors are betting that Telsa will build such a lead in EV and software required for the inevitable autonomous age that their lead will just be too big for the traditional manufacturers to ever catch up. The parallel with Nokia and Apple on smartphones is the obvious one - once the gap was there, the momentum was just too great and Nokia just too cumbersome and inflexible to be able to react. Plus if the competitive advantage in the coming car age is EV supply chain and software developers, their infrastructure and even their location on the west coast gives an huge step up.

I'd be more inclined to believe that a few years ago, but i think the bit that traditional manufacturers do have in their DNA - building large extremely complex objects at extremely high volume and extremely high quality - that bit is proving a lot harder for them to crack.

For Aston - am no analyst, but struggling to see how those profits in this market equals that valuation. They don't have the economies of scale their competitors can tap in to, and brand and fashion is just one dodgy car and one series of dodgy reviews away....

Burwood

18,709 posts

247 months

Thursday 30th August 2018
quotequote all
anonymous said:
[redacted]
Yep. It's an investment for the thick. Meanwhile the existing shareholders will be partying like it's 99. There is good reason why car companies trade at 8-12 PE range.

alfaman

6,416 posts

235 months

Friday 31st August 2018
quotequote all
Ridiculous valuation

( have done a main board IPO / RTO ... so appreciate some of the risks / issues )

1/ ridiculous EV / EBITDA multiple for a business with sector risks

2/ very short track record of solid earnings / weak earnings quality ( 2017 figures ‘fluffed’ ?)

3/ lack of compelling story for where the growth is coming from to justify stratospheric multiple.

4/ lack of influence from shareholders ... so for anyone participating in the 25% free float .... who do you think has overall control?

5/ existing shareholders likely to vote for the deal as they got in at a much lower stock price.

6/ compelling reason for IPO is surely for existing shareholders to cash out .... rather than to raise capital?

7/ any controls to stop issuance of more stock for directors ? (Dilution risk)

I’d run a mile from this....

Bonefish Blues

27,126 posts

224 months

Friday 31st August 2018
quotequote all
I know as little as makes no difference about how to value a company, but even I had a wtf moment when I heard it on the news yesterday.

cidered77

1,632 posts

198 months

Friday 31st August 2018
quotequote all
alfaman said:
Ridiculous valuation

( have done a main board IPO / RTO ... so appreciate some of the risks / issues )

1/ ridiculous EV / EBITDA multiple for a business with sector risks

2/ very short track record of solid earnings / weak earnings quality ( 2017 figures ‘fluffed’ ?)

3/ lack of compelling story for where the growth is coming from to justify stratospheric multiple.

4/ lack of influence from shareholders ... so for anyone participating in the 25% free float .... who do you think has overall control?

5/ existing shareholders likely to vote for the deal as they got in at a much lower stock price.

6/ compelling reason for IPO is surely for existing shareholders to cash out .... rather than to raise capital?

7/ any controls to stop issuance of more stock for directors ? (Dilution risk)

I’d run a mile from this....
more i read about this more i think it's really all about #6. Their existing backers took some risks in backing them in a difficult sector - into a business that historically almost always lost money. Run a slick looking IPO and allow them to cash out.

Can already see "car people" I know on facebook liking posts on the IPO - initially i'll be t'll get plenty of private money from joe public wanting to own a bit of Aston Martin, and some VC types will get rich(er)