Aston Martin will look to overtake Ferrari’s earnings multiple when its IPO concludes and shares start trading on the London Stock Exchange on October 3rd. The emblematic UK car manufacturer, maker of high end sports cars and tourers, has seen enough interest in its IPO to have announced it is targeting the upper end of a £17.50 to £22.50 per share scale.
The company’s confidence that the top end of that range will be achieved, giving Aston Martin a total market capitalisation of £5.1 billion, and catapulting it into the FTSE 100, was voiced by chief executive Andy Palmer yesterday. He told the Financial Times:
‘We have seen almost unprecedented investor interest’.
If, as the company seems to believe, the final IPO price of the shares sold is achieved at £22.50, it would translate into a multiple of 24 times 2017 earnings. That would see the company roar past rival Ferrari, which currently trades at multiple of 22 last year’s earnings. Aston Martin’s IPO needs to close at a minimum £4.7 billion valuation of the company to take it into the FTSE 100. Securing a spot in the benchmark index of the London Stock Exchange brings the immediate benefit of the company’s shares being included in the most held passive tracker funds, which will boost demand.
Investors considering the IPO are being convinced by Mr Palmer’s aggressively ambitious strategy of successfully launching a new Aston Martin model every year over seven years, before restarting the cycle, replacing them all with new editions. The first three of the initial seven new cars, the DB11, Vantage and DBS have already been launched and the DBX, Aston Martin’s first ever sports utility vehicle, will come to market next year. Justifying the valuation the company is chasing through its IPO will to a large extent rest on the success of that launch.
The market for luxury SUVs is currently buoyant. Other high end sports car makers such as Maserati and Lamborghini, famous for low-to-the-ground snarlers of sports cars, have also recently deciding that the level of demand dictates precedent-setting new SUV models. Likewise, Aston Martin’s first foray into the category next year will see the company driving into unknown territory. However, Palmer’s background at Nissan, and the CVs of many of the company’s other key managers and executives, do have plenty of SUV experience even if the Aston Martin brand does not.
The IPO will not involve Aston Martin issuing new equity and the listed shares will consist of current owners Investindustrial, the Italian group, and Adeem Investment and Primewagon, the Kuwaiti funds, selling down their stakes. The rest of the shares held by existing owners will be subject to a 180-day lock-up period.
Most retail investors will have to wait for the shares to go live on October 3rd before buying into the company if interested. However, UK-based members of Aston Martin Owners Club, will be offered to chance to participate in the IPO directly.