In October 2015 stock markets were treated to the sight of the ‘prancing horse’ of Ferrari make its stock market debut, amid much excitement as to whether such a marque brand would appeal to investors beyond its traditional fan base of the fanatical tifosi.
As it turns out the launch was a resounding success, with the share price more than doubling in price from its $50 listing price to over $130 now; however, it wasn’t all plain sailing, given the shares slid post IPO to a low of $32 before rebounding.
It is against this backdrop that another marque brand, Aston Martin, will be hoping to replicate similar success today when the iconic brand and maker of some of the most recognisable cars in the world makes its own stock market debut at £19 a share, giving it an initial valuation of £4.3bn, though it’s unlikely to propel it to within touching distance of the FTSE 100.
The early price action has seen the shares turn lower in early trading after pushing up to 1,915p initially. In the short term this might suggest that the shares may have been priced at too high a level but even Ferrari, when it first floated in 2015, saw its share price fall 40% in the first six months of trading, from $50 to a low of just above $30 a share.
Aston Martin is one of those brands that has had a turbulent existence, with seven bankruptcies in over 100 years. It has enjoyed a mystical cachet for those who have charted its tribulations from afar and have seen the cars venerated in a number of James Bond films, from the DB5 which we first saw in Goldfinger in 1964 to the DB10 that we saw in Spectre most recently, and the V12 Vanquish with ‘adaptive camouflage’ that was seen in Die Another Day, back in 2002. It also has a royal warrant; what other car company can claim to have one?
Some investors have expressed caution that the valuation seems a little on the high side, when compared to Ferrari, and the early price action certainly lends some support to that analysis. It is true that Aston Martin has only just recently returned to profit last year with revenues of £876m and pre-tax profits of £87m, after a whopping £163m loss the year before.
Putting that to one side, the prognosis does look positive with demand highest in the UK, US and China, and the average selling price up 11% to £160,000 per car, which helped push its first-half profit for this year to £106m, helped by sales of the new Vantage and DBS, as well as the existing DB11.
The biggest concerns remain around the global outlook, at a time when trade tensions are rising there is a risk that a further escalation could see the sales numbers take a hit, and that is undoubtedly something to bear in mind, even if you take the view that someone who can afford an Aston Martin isn’t likely to be as price sensitive as the conventional car buyer.
On the plus side, the company is investing the money raised in the business in terms of building extra capacity, and management appear to have a strong grasp of costs, with CEO Andy Palmer a safe pair of hands at the top of the business.
While a solid debut would be a good way to vanquishing the doubts of those who fear the valuation may be a bit too high, it could take several months before investors have a clearer picture of where the shares go to from here.