Aston Martin Cuts a Rescue Deal with F1 Billionaire

Aston Martin plans to raise £500m in an emergency funding led by Canadian Formula 1 billionaire Lawrence Stroll as the British automaker attempts to recover from a period marked by a disastrous IPO.

Lawrence Stroll’s consortium will pay £182m for a stake of 16.7% in Aston Martin at a price of £4 per share, while the company will raise the remaining £318m through the rights issue after it publishes results next month.

Following the announcement, the shares of Aston Martin jumped nearly 30% early today.

The company said its latest decisions are the result of “disappointing performance” in 2019.

Stroll will see his stake rise to 20% in Aston Martin and he will become its executive chairman. Consequently, the current CEO Penny Hughes will be stepping down from her duty once the deal is done.

“The difficult trading performance in 2019 resulted in severe pressure on liquidity which has left the company with no alternative but to seek substantial additional equity financing. Without this, the balance sheet is not robust enough to support the operations of the group,” said Hughes.

According to the recently released profit working,  Aston Martin retail sales – which account for its sales from dealers to consumers – climbed 12% compared to the previous year. On the other hand, its wholesale volumes – which include how many vehicles the dealers are ordering from the company itself – dropped 7% to 5,809.

The reshuffle comes as a result of a challenging 2019, in which sales were harmed by oversupply at dealerships and several cost reductions. Earlier this month, Aston Martin warned that earnings for 2019 would fall between £130m and £140m, as opposed to £247.3m it reported last year, and well below analysts’ expectations.

As part of its latest plans, the carmaker will postpone investments into a set of electric vehicles — which were planned for 2022 — until after 2025, and has delayed the launch of its supercar until 2022.

Instead, Aston Martin will invest in a V6 hybrid engine, aimed at reducing CO2 output from its vehicles. 

The company said the new engine will be produced in the UK, and it currently uses V8 and V12 engines. Also, Aston Martin will start making its first sport-utility vehicle, the DBX, in the second quarter of this year.