Aston’s top boss vanquishes concerns of IPO debut

October 6, 2018
A new SUV and Aston’s first electric car - the Rapide E - are both due next year

Andy Palmer has spent a good part of his time at the helm of Aston Martin spreading the word that the luxury sports-car maker should command the high valuations of its rival Ferrari.

By the start of trading on the London Stock Exchange on Wednesday, the chief executive had largely succeeded. Aston Martin was priced at £19 ($24.69) a share in an initial public offering, on par with Ferrari’s lofty profit multiples. But by day’s end, the stock had slipped 4.7 per cent, and continued its downward slide on Thursday, losing 0.6 per cent in London.

The drop offers proof that Mr Palmer has a lot to do to convince investors of his vision for the company.

“We’ve taken 105 years to get to an IPO, we are not going to worry much on what the initial shares are doing,” Mr Palmer said in an interview with Bloomberg TV. “We will always look over the longer term.”

Analysts were never so sure that the comparison with Ferrari was warranted. The Italian company is more profitable and has a stronger balance sheet, generating piles of cash.

Mr Palmer had spent the final two weeks before the IPO in a sprint, pitching the deal to more than 350 investors across the globe. But as the stock listing approached, it became clear the upper end of the original target of £22.50 was out of reach.

They priced it pretty well, getting that valuation,” said Arndt Ellinghorst, an analyst at Evercore ISI in London. “For now, there is very little left until people see some numbers and are willing to take more risk.”

Mr Palmer pointed out that Ferrari lost 38 per cent in its first four months of trading. It’s long since recovered, and is up 36 per cent this year to a $25.8 billion market value, despite industry uncertainty from trade wars and a softening of markets in China and the US.

“Just remember what happened to Ferrari when they listed. There was a lot of volatility there,” Mr Palmer said. For Aston Martin, it’ll subside as investors “get comfortable with the idea that there’s a second car maker in the luxury space.”

The British manufacturer is still working to expand its presence in the sports-car world with the Vanquish, Vantage and DB models. A new SUV and Aston’s first electric car - the Rapide E - are both due next year.

Mr Palmer has unveiled a series of models to support a plan to eventually double output to 14,000 cars a year.

He has managed to turn around a historically loss-making car-maker into a profit generating company that is on its way to building its cash flow.