FTSE 250: Aston Martin shares plunge after announcing discounted rights issue

Shares in Aston Martin fell as much as 14% on Monday. Photo: Martyn Lucy/Getty Images
Shares in Aston Martin fell as much as 14% on Monday. Photo: Martyn Lucy/Getty (Martyn Lucy via Getty Images)

Shares in Aston Martin Lagonda (AML.L) plunged in afternoon trade on Monday after it confirmed it is selling shares at a steep discount in an upcoming capital raise.

The FTSE 250 (^FTMC) British car firm announced a heavily discounted £576m ($663m) rights issue to help the lossmaking carmaker pay down debt. Shares fell over 14.3% to £411.7 per share in London.

The group will issue 559 million new shares at 103p per new share. That represents a 79% discount to the end of last week.

Aston Martin plans to use a large chunk of the proceeds to pay down debt, which stood at £957m at the end of March.

The move is also part of a plan announced by the luxury carmaker in July to raise £654m of equity, which it said would drive its "growth ambitions and supporting positive free cash flow generation".

Around 45% of the four-for-one rights issue is backed by Saudi Arabia’s Public Investment Fund (PIF) sovereign wealth fund.

The PIF is a major shareholder in Aston Martin along with Mercedes-Benz (MBG.DE) and owner Lawrence Stroll’s Yew Tree consortium.

It comes as the group announced in July that it would tap the Saudi sovereign wealth fund, controlled by crown prince Mohammed Bin Salman.

Under the deal, the Kingdom’s PIF took a 16.7% share via a £78m equity placing, making it the second largest shareholder with two board seats.

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Russ Mould, investment director at AJ Bell, said: "For what’s meant to be a premium brand, Aston Martin is behaving like a desperate start-up company, going cap in hand once again to shareholders asking for more money. Its offering of shares at a 78.5% discount to last Friday’s closing price shows how desperate it is to secure new funds.

"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.

"The car manufacturer has been a flop since joining the stock market and one has to wonder if it would be better off as a privately-owned company."

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