Luxury British carmaker maker Aston Martin is seeking a price tag of up to 5.1 billion pounds ($6.7 billion) in its stock market debut next month and has geared up for any Brexit outcome.
The company, famed for making the sports car driven by fictional secret agent James Bond, said last month it planned to sell around 25% of its stock in the first initial public offering (IPO) by a British carmaker for decades, Reuters reported.
A bookrunner for the IPO said late on Thursday the company had already received orders for all the stock on sale. A source familiar with the matter said that was at the bottom end of a price range valuing the company at 4.02-5.07 billion pounds.
Aston Martin hopes to announce the final price for its stock on or around Oct. 3 and expects it to be admitted to the London Stock Exchange on or around Oct. 8.
However, some analysts have raised questions about the valuation it is seeking.
Carmakers have warned any customs checks and duties that might result from Britain’s departure from the European Union next March could slow production and add costs to an industry that has been one of the country’s few manufacturing success stories of recent years.
The chief executive of Aston, which builds all its cars in Britain, said the company had boosted its stock of engines and components in case free and unfettered trade with the EU ends in a few months’ time.
“We’re up to five days of engine stock for example and we’ve got a very large warehouse in Wellesbourne [in central England] where we have at least five days of car stock,” Andy Palmer told Reuters, up from the previous three days’ worth of components held by the firm.
“If there are tariffs ... for every car we lose because of a 10% tariff into Europe, we presumably pick up from Ferrari and Lamborghini in the other direction because obviously their cars become more expensive in the UK,” he said.
But in its IPO prospectus, Aston warned it could face a “significant adverse effect” on sales and profitability if the 18% of sales it makes into the EU are hit by restrictions.
The majority of the company’s suppliers are located in the EU meaning limitations on the movement of goods could also hit the firm’s production schedule and costs.
Halfway Down the Runway
London and Brussels hope to conclude a Brexit agreement by the end of the year, but carmakers are worried that failure to reach a deal could lead to snarl-ups on motorways and at ports, disrupting trade.
Jaguar Land Rover boss Ralf Speth warned last week the wrong Brexit deal could cost tens of thousands of car jobs and risk production at the firm, Britain’s biggest carmaker.
Aston set a price range of 17.50 pounds to 22.50 pounds per share for the 25% of stock it is floating, equating to a deal size of about 1.0-1.27 billion pounds.
It said last month the IPO would involve a sale of shares by its main owners, Kuwaiti and Italian private equity groups.
The carmaker has undergone a turnaround plan since Palmer took over in 2014, boosting production and expanding into new segments, with a new factory due to open in 2019.
Palmer will receive an annual salary of 1.2 million pounds after the IPO and will hold 0.6% of shares in the company, which he will be able to sell down in stages over four years—a move the company said showed the long-term interests of management and shareholders would be aligned.
The central England-based automaker sees Italian brand Ferrari, which made its Wall Street debut in 2015 amid strong investor demand, as a model to follow. But some analysts are skeptical.
“Aston Martin pricing demands high level of confidence in company’s plans,” said Evercore ISI’s Arndt Ellinghorst.
“We continue to flag AM’s extremely high R&D capitalization rate ... which is elevating reported margins and earnings in the near-term.”
Palmer, however, said investor interest had been “unprecedented” so far, as he hits the road with a message there is more growth to come.
“The tendency of the investors are ‘long only’ type investors, people that understand that this is a growth story,” he said, when asked who he would be meeting. Such investors tend to be institutions that often hold stock for many years.
“The aeroplane is halfway down the runway but there’s still half the runway to go.”
Add new comment
Read our comment policy before posting your viewpoints