Top City analyst: Aston Martin might have to tap shareholders for additional funds

Aston Martin Lagonda, the luxury car company, may need to call shareholders again for additional funds for its fourth year of operation. This is according to a City analyst. 

James Congdon of broker Canaccord Genuity runs the Quest research division. He said that Aston Martin equity is ‘vulnerable. 

He said, “We are increasingly able to see the scenario in which the company will need capital raise again,” 

In the slow lane: Since the float, Aston Martin's stock price has collapsed almost 90 per cent

In the slow lane: Since the float, Aston Martin’s stock price has collapsed almost 90 per cent

Congdon was the sole City analyst to highlight that Aston Martin – which now has its own Formula 1 team – would need to raise fresh funds several times after the business floated on the London Stock Exchange in 2018. 

Since the float, the company’s stock price has collapsed almost 90 per cent, leaving the maker of James Bond’s favourite automobile with a valuation of just £1.4billion. 

Aston Martin has had to raise funds several times, which is why its shares performed poorly. 

In 2020, for example, the company raised £540million through a rights issue as part of a deal that saw Lawrence Stroll, the billionaire retail tycoon, become chairman of the business. 

Then Aston Martin raised another £152million in June 2020 and a further £125million four months later, both via equity placings. 

Aston Martin issued a profit warning earlier this year as part of its unscheduled trading statements. 

It said operating earnings would be about £15million – about 10 per cent lower than expected – after Aston Martin failed to deliver as many as £2.5million worth of the Valkyrie hypercars it had promised. 

The company said it had as much as £420million in cash at the year end. 

Congdon stated that despite the sales increase of the DBX 2021, and receiving customer deposits to their Valkyrie hypercars, Bloomberg consensus forecasts that the company would continue to burn money in 2022-2023. 

‘The company did have £506million of cash at hand (but importantly gross debt of £1.3billion) in July but this has already fallen to £420million in those six months – an annualised cash burn of £172million. 

“Capital spending commitments are increasing at a point when the company plans to switch to electric model manufacturing.” 

Congdon said: “With the increasing capex [capital expenditure]We wouldn’t be surprised to see the company seek to raise equity soon due to rising costs and the current cash burn rate. The number of shares held by short sellers – investors betting the company’s stock price will fall – increased to 2.8 per cent last week after Parvus Asset Management Europe emerged as the latest hedge fund with a position. 

Blackrock Capital Management, Gladstone Capital Management, and Gladstone Capital Management were two other hedge funds to have short positions. 

Aston Martin has had an interesting history since its inception in 1913. After a DB5 was used by James Bond in 1964’s film Goldfinger, the cars were made into a British cultural symbol. The company was reportedly through seven bankruptcy filings. 

A spokesperson from Aston Martin stated that Aston Martin Lagonda does not have any plans or requirements to raise additional funding. 

A strike is now unlikely. A plan to end a defined benefit retirement scheme led to the possibility of industrial action. Unions said it could have led to workers losing £100,000 in retirement income. 

However, a deal was reached to offer employees cash and shares in Aston Martin. This has opened the door for possible changes.