Aston Martin shares nosedive once more as carmaker begins major rights issue

Aston Martin shares tumbled again on Monday as the struggling carmaker began its planned four-for-one £576million rights issue.

Nearly 560 million shares have been offered at 103 pence each to investors by the company, representing a 78.5 per cent discount to the company’s closing share price of £4.80 on 2 September.

It is undertaking the measure as part of plans to slash its debt pile, invest in developing new electric vehicles and get closer to achieving its medium-term targets, such as earning around £2billion in revenue by 2024/25.

Commitments have been received from the Public Investment Fund, which is Saudi Arabia’s sovereign wealth fund, Mercedes-Benz and the Yew Tree Consortium, led by Aston Martin’s executive chairman Lawrence Stroll.

The PIF, whose chairman is Crown Prince Mohammed bin Salman, has also agreed to pay £78million as part of an equity placing, making it the second largest investor and giving it two board seats.

Following today’s announcement, Aston Martin Lagonda shares plunged 62 per cent to £1.82, meaning their value has plummeted by almost three-quarters in the past year.

Since floating on the London Stock Exchange with an offer price of £19 four years ago, the automotive manufacturer’s shares have undergone a disastrous decline in value as it has grappled with poor sales.

It narrowly avoided collapse at the beginning of 2020 when it received a bailout from Stroll’s consortium, but took another major blow when the Covid-19 pandemic caused a worldwide slowdown in car sales.

Purchases have rebounded as lockdown restrictions have loosened, yet the business still saw half-year losses more than quadruple to £289.8million due to higher debt interest payments and adverse foreign exchange fluctuations.

Trade has been further affected this year by parts shortages delaying the delivery of hundreds of DBX vehicles to the Americas region, costing it more than £80million.

However, the Warwickshire-based group expects wholesale volume growth in the second half of 2022 as supply chain issues improve, demand continues to be robust, and production of the V12 Vantage and DBX707 models is ramped up. 

When the company revealed the cut-price rights issue last week, AJ Bell investment director Russ Mould declared that Aston Martin was ‘behaving like a desperate start-up company’.

He added: ‘While it says the new money should help it achieve strategic goals, this might simply be Aston Martin finding another piece of frayed rope to keep it afloat and avoid sinking completely into quicksand. 

‘The key question is for how long the rope will stay intact before the company needs help again.’