Would £10,000 invested in Aston Martin (LSE: AML) shares at its IPO have been a good investment? In a word: no. Any money invested in the name behind James Bond’s most famous cars would have been, to put it frankly, a disaster.
The stock was listed on the London Stock Exchange in 2018 at a share price of £19. The initial valuation of £4.33bn placed it within spitting distance of the FTSE 100. The excitement of the return of one of Britain’s most beloved car brands to a public listing made it one of the biggest IPOs of the year.
A steep decline followed. The company was plagued with problems. The shares now trade for pennies. The 64p share price is 2% off its previous high. A £10,000 stake bought at IPO is now worth £158.
Just what on earth happened here?
What happened?
Well, it’s not down to the number of cars sold. While there’s some difference between product lines – the company’s first-ever SUV (the Aston Martin DBX) proving something of a hit, especially in China – the firm has been selling in the region of 6,000 cars a year consistently. Revenues are in the billions too.
The problem is: it isn’t making any money. Net operating margins came in at -18% in the last financial year. The firm hasn’t posted a profit since IPO. The last year’s ‘black hole’ was to the tune of £323m.
Several years without earnings has meant a growing debt pile. The £1.4bn net debt is now over double the firm’s equity. These are the kind of numbers that spell trouble. They go some way to explain a share price at a tiny fraction of its IPO value too.
A buy?
So we have a world-famous brand of luxury cars with a share price that has a big ‘98% off’ sticker on it. Not to mention Aston Martin is running a prestige-enhancing Formula 1 team too with Fernando Alonso sitting in the driver’s seat. Could a remarkable turnaround be on the cards? Is this going to be seen as a bargain buy in the years to come?
Much will hinge on the popularity of its upcoming cars. The Aston Martin Vanquish is due for release soon. The company’s first hybrid – a vehicle with both electric and conventional petrol power sources – is ready to start production too. If these cars set the world alight, then it might kickstart a change in fortunes.
Personally, I think there’s a little too much risk here. Perhaps the brightest sliver of hope is the rumour of a Saudi investment fund taking the brand private. That might (or might not) mean shareholders get a premium on the current price. But for me, there are much more attractive long-term investments that interest me at the moment.
