The Motley Fool

The Aston Martin (AML) share price crashes 15%, and I see worse to come

If you buy shares in a flotation, presumably you’re hoping for your investment to have a healthy start to life as a listed company, and at least some promising early results.

Sadly, if you’d bought Aston Martin Lagonda (LSE: AML) shares at IPO in September 2018, you’d be facing something very different today. The shares are, as I write, down 80% from their opening price, including a 15% crash Thursday morning.

Claim your FREE copy of The Motley Fool’s Bear Market Survival Guide.

Global stock markets may be reeling from the coronavirus, but you don’t have to face this down market alone. Help yourself to a FREE copy of The Motley Fool’s Bear Market Survival Guide and discover the five steps you can take right now to try and bolster your portfolio… including how you can aim to turn today’s market uncertainty to your advantage. Click here to claim your FREE copy now!

There are two reasons for the latest slump.

Big loss

Results for 2019 show a 9% drop in revenue, with adjusted EBITDA slumping by 46%. The company managed to turn a £72.8m operating profit in 2018 into a loss of £36.7m, with an adjusted loss per share of 32.1p.

Net debt soared to £876.2m at 31 December 2019, from £559.5m a year previously. That’s not far short of revenue, and it puts the company on an adjusted leverage of 7.3 times.

Addressing the outlook for the company, the update said that “2020 is the year in which the business will be reset in order that it can start to operate as a true luxury car brand. This process is absolutely necessary for the long-term performance and value of the company.”

While there’s no questioning the necessity spoken of in that second sentence, is the first one really saying what I think it says? We’re well over a year on from Aston Martin’s flotation, and it’s only now thinking of how to get operations started?


Is this the most badly botched flotation in stock market history? I suspect there are worse efforts out there, but I’m struggling to think of one.

At the same time as the results were released, Aston Martin gave us an update on its turnaround hopes.

Billionaire investor and F1 boss Lawrence Stroll stepped in with a rescue plan last month, putting £182m into the business for a 16.7% stake. The firm has now confirmed the expected further rights issue of £317m, so we private investors can get in if we want. Lucky us, eh? The new issue price of 207p per share represents a 47% discount to Wednesday’s closing price, so that’s another reason the shares slumped on Thursday.


If Aston Martin is to avoid going bust (which has happened seven times so far in its history), there’s no doubt it needs this big cash injection to stand any chance. But it also needs some sort of workable strategy, and so far I haven’t really seen one. All I’m hearing is something along the lines of: “Well, that was a flop, so let’s raise more cash and try the same thing again,” followed closely by “how do you make a profit selling luxury cars? Anyone got any ideas?

Well maybe that’s a bit extreme, but the strategy seems to be to carry on making the cars, and hope new models will be more popular and will sell better.

Do I need to tell you that I wouldn’t go anywhere near Aston Martin shares? I’ve thought it was a potential disaster right from day one, and I’ve seen nothing to change my mind as we head further into 2020.

Are you prepared for the next stock market correction (or even a bear market)?

It’s official: global stock markets have been on a tear for more than a decade, making this the longest bull market in history.

But this seemingly unstoppable run of success poses an uncomfortable question for investors: when will the current bull market finally run out of steam?

Opinions are split about whether we’re about to see a pullback — or even a bear market — in 2020. But one thing is crystal clear: right now there’s plenty of uncertainty and bad news out there!

It’s not just the threat posed by the coronavirus outbreak that could cause disruption — Trump’s ongoing trade-war with China and the UK’s Brexit trade negotiations with the EU rumble on... and then there’s the potential threat of both the German and Japanese economies entering recession...

It all adds up to a nasty cocktail with the potential to wreak havoc and send your portfolio into a tailspin.

Of course, nobody likes to see the value of their portfolio fall, but fortunately, you don’t have to go it alone. Download a FREE copy of our Bear Market Survival Guide today and discover the five steps we believe any investor can take right now to prepare for a downturn… including how you could potentially turn today’s market uncertainty to your advantage!

Click here to claim your free copy of this Motley Fool report now.

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.