Aston Martin’s trading debut flops

Bloomberg

Aston Martin’s trading debut floundered after investors balked at a valuation that had put the UK luxury carmaker on par with larger and more profitable Italian competitor Ferrari NV. The stock fell as much as 7.5 percent in London on Wednesday from its initial public offering price of 19 pounds ($24.70), a figure that gave the Gaydon, England-based company a market capitalization of 4.3 billion pounds.
The flop came after the marque made famous in the James Bond series of spy films had already pared back its IPO ambitions this week by narrowing and lowering the share pricing range from an initial valuation of as much as 5.1 billion pounds. In the lead up to the stock sale by Aston Martin’s investors, analysts had questioned comparisons with its Italian competitor.
“It is clear to us that in terms of consistency of returns, Ferrari is superior with a better financial strength rating,” Canaccord Genuity analysts said in a report, noting that Aston Martin didn’t generate any operating free cash flow last year.
Aston Martin’s IPO valuation was 20.7 times first-half earnings, according to Bloomberg data, close to the current share multiple of 21 times expected 2018 profit for Ferrari, which also has a stronger balance sheet. Both figures are more in line with luxury-goods companies than other automakers.

MARKET ‘ADJUSTING’
“We’ve taken 105 years to get to an IPO, we are not going to worry much on what the initial shares are doing as we will always look over the longer term,” Chief Executive Officer Andy Palmer said in an interview with Bloomberg TV. As only the second luxury carmaker to go public, the market is still “adjusting,” he said.
The British manufacturer, now known as Aston Martin Lagonda Global Holdings Plc, is planning to expand its presence in the sports-car world with the Vanquish, Vantage and DB models. It’s also reviving the Lagonda name to break into the segment shared by UK rivals Rolls-Royce Motors and Bentley.
The pricing was impressive from Aston Martin’s viewpoint but “far too expensive” given a backstory of historical losses and future targets reliant on the company replicating Ferrari’s performance after its own 2015 listing, according to Arndt Ellinghorst, an analyst at Evercore ISI in London. It also shows that enthusiasm for luxury stocks is undimmed.
Owners including Italian private-equity firm Investindustrial SpA and Kuwaiti investors Adeem Investments and Primewagon were selling 27.5 percent of stock, with an over-allotment option, for an offer size of 1.19 billion pounds.