Description

Aston Martin Lagonda (“Aston Martin”) is a British car manufacturer with a checkered past. The company has gone bankrupt 7 times throughout its history and loss-making up until very recently. On the surface, it seems like Aston Martin has experienced a rejuvenation since the ex-Nissan executive Andy Palmer took over the reins in 2014.

I think there is more than meets the eye however. While Aston Martin newly released vehicles look stunning and may indeed accelerate the top-line growth of the company, underlying profitability remains poor. It seems that he recent turnaround is more due to aggressive accounting maneuvers than any fundamental change to the business.

Controlling shareholders Industrialinvest and Adeem Investment offloaded part of their shares into the IPO and they will most likely be selling after lock-up expiry on 1 April. This sets minority shareholders up for a bumpy ride as existing shareholders will probably try to exit before more conservative accounting policies are put in place.

The motive

Aston Martin was founded in London in 1913 and remained independent until Ford’s purchase of the company in 1987. It has featured in many Bond movies and remains a well-recognized brand in the UK and elsewhere. In 2007, Ford sold its shares to a consortium of Kuwaiti investors for £470m. Since then Italian private equity company Industrialinvest and Daimler have also acquired significant stakes and helped appoint Andy Palmer as the company's CEO.

One year after Palmer became CEO, the company unveiled a plan to turn around the company. The gist of the plan was to introduce one mass-market vehicle per year until 2022. The first vehicle launched under the new plan was the DB11 in 2017, followed by DBS Superleggera in 2018 and the soon-to-be-released DBX SUV.

Aston Martin DB11

Aston Martin DBS Superleggera