In spite of receiving a $663 million cash infusion by a group led by Canadian billionaire Lawrence Stroll, the European Securities and Markets Authority says it’s not enough for Aston Martin. The Authority says that Aston Martin does not have sufficient working capital. An “increased and unquantifiable uncertainty” because of the coronavirus crisis does not allow for a “reasonable worse case downside” for Aston. Things are generally horribly bad for the British company in the eyes of the Authority. Aston Martin is just about toast.
Aston Martin’s cash flow was to have been the least of its worries after going pubic
Cash flow was to be Aston’s least worry after going public in 2018. But its turnaround plans and now coronavirus complications have added demands on the cash flow that was not foreseen. “Taking into account the proceeds of the capital raise (Aston Martin) does not have sufficient working capital to meet its requirements for 12 months,” says the Authority.
Stroll got Aston Martin to renegotiate for him to become executive chairman in exchange for another loan from his Yew Tree investment group. Between the IPO in 2018 and this latest infusion from Stroll, the company issued a $190 million bond in April 2019 and a $150 million bond in September 2019. Just in 2020 Aston Martin’s stock has dropped 60% and almost 90% since the IPO price. In other words, the stock is almost worth nothing.
Aston Martin was counting on the DBX SUV to lift profits
The company has been counting on the DBX SUV to help pull it out of its severe slump. It says it has over 2,000 deposits for the DBX with more orders expected to continue. At $189,000 and with higher volumes planned for the DBX Aston Martin was expecting it to right the ship in a similar way to Lamborghini’s Urus.
The Urus SUV has tripled Lambo’s take and continues to be popular. It is expanding production to meet demand. Aston Martin has been eyeing Lambo’s results with the hope of matching its success. But deliveries won’t start until at least September.
There is a disconnect between Stroll and where the company is at
There seems to be a certain disconnect between Stroll and Aston Martin’s dire situation. While this news paints a bleak picture Stroll is touting Aston Martin’s return to F1 racing. Just this week he told Autocar that Aston Martin returning to F1 as announced a few weeks ago is vital to the company.
Just this week he said he’s actively beginning to “lay the foundations for the success of the team, the development of the cars, and building of the brand globally.” But that flies in the face of F1 not racing until we don’t know when because of the coronavirus. “A brand with the pedigree and history of Aston Martin needs to be competing at the highest level of motorsports.”
Is an F1 venture really going to help right now?
That might be true for a healthy company but in the situation, Aston Martin is in. Won’t it drain a substantial amount of capital it needs just to survive? Will Aston Martin even have discretionary capital for an F1 venture? Or will Stroll fund that portion beyond the investment capital from his group out of his own pocket?
At this point, everything happening at Aston Martin doesn’t seem to bode well for it surviving to the point that racing resumes.