At the end of September 2023, three directors bought 8.725m Aston Martin (LSE:AML) shares at £2.57p each. At a total cost of £22,423,250, this is a strong signal that they have confidence in the company’s future prospects.
And they are not alone.
Since October 2022, the stock has been the best performer on the FTSE 250, rising nearly 140% to around £2.40.
However, it’s a long way short of the opening price of £19, when the company made its stock market debut on 3 October 2018.
A history of losses
Every year since its IPO, Aston Martin has recorded a loss.
From to 2018 to 2022, it lost £1.3bn. And this year isn’t any better. During the first six months of 2022, it was in the red by £142m.
The last time it made a profit (£77m) was in 2018 — the year before it floated.
And yet, on 28 September 2023, the company’s chairman, Lawrence Stroll, said there has been a “major turnaround” over the past three years.
It’s true that sales are increasing but there’s no sign of it being profitable. The old adage that, ‘turnover’s for vanity and profits are for sanity’, springs to mind.
Struggling to go green
Aston Martin also appears to be lagging some of its competitors when it comes to electrifying its model range. It’s first all-electric car isn’t due until 2025.
However, Rishi Sunak has helped enormously by extending the phasing out of combustible engines by five years, to 2035.
It’s ironic that the company that was repeatedly voted the coolest automotive brand has recently lost this crown to Tesla.
Time to get serious
I’m also concerned that the company has become a bit of a toy for the wealthy. Something to play with rather than develop and grow.
And I think its participation in Formula One is a good example of this. Since 2021, it’s yet to win a race from 122 starts.
The company justifies its involvement by claiming that 95% of US customers feel its presence in the sport makes them more likely to consider the brand.
Indeed, compared to the previous year, sales to the Americas increased by £99m to £402m, in 2022. This market is now its largest and accounts for 29.1% of all revenue. But I wonder how much of this growth is directly attributable to the company’s investment in motorsport.
Throughout its history, wealthy investors have been drawn to Aston Martin. But its had few periods of stability.
And presumably because of its iconic status, whenever the company has previously got into trouble, it’s always been rescued. It survives today despite having gone bust seven times in its 110-year history.
An alternative idea
Primarily due to its ongoing losses, which could mean it needs to raise more money, I don’t want to own any shares in the company.
I think there’s more money to be made from buying one of its beautiful cars and holding on to it.
On 4 November 2023, Sotheby’s is auctioning a 1963 DB4 convertible in midnight blue. Costing around £5,000 when new, it has a guide price of £1.2m-£1.6m. If I had the money, I’d rather have one of those!
