almost 4 years ago • 2 mins
Aston Martin’s shares fell another 90% this week – but so long as an unrelated Bond serves the British government’s interests, investors in search of returns may still be tempted by the troubled luxury carmaker… 🤵
Following a blockbuster initial public offering (IPO) in 2018, Aston quickly went off track. After it issued yet another profit warning in January, a group of investors stepped in to prop up the car company’s finances in return for a 25% stake and a seat at the wheel – just as the economic impact of the coronavirus accelerated.
Aston Martin’s revenue in the first quarter of 2020 was 60% lower than a year before, while losses were seven times higher. With the second quarter likely to be even worse – thanks to declining average price tags, frozen production and overall car sales in its main UK market plummeting 97% last month – the company scrapped its financial guidance on Wednesday and said that it might soon need to raise even more cash from investors 🙄
Aston’s not the only one struggling: British supercar maker McLaren is looking at mortgaging both its collection of classic motors and its factory in order to raise enough funds to weather the coronavirus storm. It may be glad it decided against “going public”, however: Aston’s shares are now worth less than 2% of their $25 IPO price.
Although its debts already total 10 times operating profit, Aston’s future financing plans may well feature even more high-interest bonds – which, like their secret-service namesake, are attractive but extremely high-risk, contingent as their returns are on the success of the carmaker’s handbrake turnaround 🏎
But with UK government bonds currently offering a negative return, investors might be tempted. Despite it emerging on Thursday that the cost of saving the country’s shrinking economy would be even higher than expected, strong demand sent two-year debt yields to a new record low – suggesting an even cheaper cost of borrowing. Bonds really are working for the British government…
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