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By DCB Editorial, July 20, 2022
A few days ago a well-known automotive car news site revealed that Aston Martin was considering adopting electric vehicle platforms from Mercedes, Lucid, and or Rimac. We believe that this puff-piece article was an attempt by Aston Martin to get a quick flutter on the stock markets. The stock markets, as complex as they have become, operate on a very simple formula… confidence. And if the company is listed on the stock markets, a positive news cycle on a particular firm in whatever industry can ignite a temporary rise in share value.
We know straight away Rimac will never supply Aston Martin with an electric vehicle platform, why? Rimac has an established relationship with the Volkswagen Group. Mercedes will step in to supply Aston Martin with electric vehicle technology because Mercedes currently has a shareholding in Aston Martin.
The link with Lucid is feeding the dog a bone. In this case, there is no dog and no bone. However, Saudi Arabia’s Sovereign Wealth Fund has heavily invested in Lucid. And guess what? Saudi Arabia will invest in Aston Martin by pumping in £73M GBP worth of investment in exchange for 16.7 percent shareholding.
The funding by Saudi’s Public Investment Fund will form part of an additional £575M GBP investment strategy expected to take place later this year. The £575M GBP will be raised through a rights issue. A rights issue gives shareholders the exclusive right to buy shares at a discounted rate.
Key investors will reduce their shareholding by a few percent and buy back the residual shares at a discount. This is a desperate sign that the company is unable to raise funds through bank loans due to being seen as a high-risk no return venture.
The rights issue tactic is used to raise new funds from investors in the short term. However, the market may look upon a rights issue as a red signal, a sign that the company is in a perilous state. With an increased supply of shares available following a rights issue, this could be very bad news for a company’s market value.
So why are Aston Martin shareholders seeking to make the company look unattractive and to whom? Geely Automotive is apparently circling and is considering buying shares in Aston Martin. The proposed £575M of investment is chicken feed even for a low-volume supercar maker with massive ambitions to break 10,000 unit sales per year.
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