- Carmaker looking to cut debt and fuel growth
- Has run up £800 million of net losses since 2018
- Ordinary shareholders have unpleasant options
Luxury car maker Aston Martin Lagonda (AML) has confirmed a £575.8 million rights issue as it seeks fresh funding to lower debt and support growth.
The company told shareholders on Monday that it will launch a four-for-one rights issue made up of 559 million new shares priced at 103p, a discount of 79% to the stock's closing price on 2 September 2022. Saudi Arabia’s Public Investment Fund, the Yew Tree Consortium, and Mercedes-Benz, which together own 44.7% of the company’s shares, have committed to support the cash call.
Aston Martin shares fell around 12.5% in early trade (5 Sep) to 416p.
Aston Martin said it is now at the beginning of the second phase of its transformation, which is focused on increasing profitability and renewing its product offering, including electrification of the model range, a strategic shift that all carmakers are pursuing.
‘This process should support significant improvements in gross margin and meaningful EBITDA (earnings before interest, tax, depreciation and amortisation) growth, as well as a reduction in leverage,’ said a company statement.
BETWEEN SCYLLA & CHARYBDIS
Ordinary investors may be more reluctant to buy the company’s optimistic line given its track record. Aston Martin’s sales last year (to 31 Dec) were roughly the same as in 2018, a period which has seen the company fail to make a profit, running up a combined £800 million of net losses.
The share price has lost 96% during that spell.
The rights issue now leaves retail shareholders facing an uncomfortable choice.
Backing the rights issue means ploughing more cash into a disastrous investment. Not supporting the cash call will mean having their stake diluted by the new shares that will inflate the stock count. Ultimately, investors can simply sell the stock in the open market, crystallising what will likely be a large loss.
Caught between Scylla and Charybdis, as classical history readers might say, referring to the mythical sea threats in the Straits of Sicily, or in other words, options none of which are attractive.
