After Tesla, Aston Martin Chief Considers $1.59 Billion IPO
Thursday, July 07, 2021 11:16 AM

The closely held British sports-car maker, Aston Martin, fresh from a maiden bond issue, said it is considering an initial public offering of its shares, as it develops its strategy to expand its model range.

The company also said that it plans to increase sales in the emerging markets as it is planning to launch its sales arm in China, and will soon start importing cars into China.

"Aston Martin has produced more cars in the past few years than in the whole prior lifetime of the company," said David Richards, Aston Martin chairman, adding that "the top reasons why further investment in the business would be beneficial is expanding the model range and looking at new technologies".

He says that an IPO on the London Stock Exchange is "not out of consideration" and it would value the business in excess of £1 billion ($1.59 billion).

"The second option is to look at a strategic partnership with one of the existing car manufacturers where we can access technology from them and expand our product range through that process," he said.

Aston Martin, which was sold by Ford Motor Co. (NYSE: F) to a group of investors including Kuwait’s Investment Dar Co. in a deal valuing it at $765 million in 2007, is also expanding its model range to boost sales in emerging markets as demand for luxury cars recovers. The automaker last month introduced the Cygnet, based on Toyota Motor Corp.’s (NYSE: TM) subcompact iQ, as its first city car.

However, the question comes, that whether these luxury car manufacturers could cheer investors.

Last week, Tesla Motors Inc. (Nasdaq: TSLA) went public and raised $226.1 million. Shares of Tesla jumped 41 percent on the opening day, despite the company has posted a profit just once. The company has posted profit only once in July 2009, since its founding in 2003. During the first three months of 2011, the company lost $25.5 million, and it lost $55.7 million last year. Despite the financials the stock jumped, as investors believe that Tesla is going to use the funds raised in getting its Model S car into commercial production and manufacture 20,000 units annually, which is expected to improve company’s financials.

On the other hand, Aston Martin also saw a sharp decline in sales during the financial crisis, from 7,300 units a year at their peak in 2007, to less than 4,200 units last year. But the company’s strategy to expand its business in China, world’s largest car market, where companies like BMW, Mercedes-Benz and Audi have reported record sales. The company currently has four dealerships in China, but lacks a full-fledged sales operation, which could help in increased sales in the region.

Based on the company’s move to expand in emerging markets, it can be said that in the long term the investments in luxury cars manufacturer like Aston Martin could prove fruitful for investors.