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Home / Special Reports / Aston Martin IPO

This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.

23 September 2018

Aston Martin IPO

License to make a killing? James Bond’s favourite car, the marque automaker Aston Martin has finally announced details of its Initial Public Offering (IPO).

Eagerly-awaited trading of shares in the first British carmaker to go public since 1970’s has generated tremendous excitement. Most traders were hopeful that the IPO, first announced in late August, might launch sometime before the end of 2018.

It was, therefore, a very pleasant surprise for UK Index traders, to hear that Aston Martin announced in its IPO prospectus that conditional trading will commence on Wednesday, 3 October.

With less than 2 weeks remaining until the automaker becomes a public company, now is the best time to prepare your trading resources to take advantage of the upcoming market opportunity.

Whether Aston Martin shares crash following a disappointing IPO or soar above the proposed 1750-2250p pricing range, thanks to strong emotional attachment to the iconic luxury brand, you can benefit with the help of Accendo Markets brokers and its award-winning research team.

The following report answers key questions ahead of the company’s London debut, such as the IPO prices and dates, as well as reviewing the current state of Aston Martin and how you can trade the exciting new listing with Accendo Markets.

Luxury brand

Aston Martin sees itself as a luxury company that deserves a premium valuation, similar to Hermès, LVMH and Ferrari. Much like its Italian rival, Aston Martin has expanded beyond cars into ancillary products, creating a brand that is as much about lifestyle and emotional impact as it is about driving.

Parallels with Ferrari’s October 2015 IPO spring to mind of investors considering how Aston Martin shares will behave following its floatation on the London Stock Exchange (LSE). The Italian carmaker’s public trading may have seen its shares close 3% higher on Day 1, but within six months shares had fallen by close to 50% after a 22% slump in supercar shipments in China. The shares have, however, more than tripled since, hitting record highs this summer.

Ferrari currently trades at a valuation of 36 times 2018 estimated profits. This compares to 7.3x for other European automakers, suggesting a premium luxury valuation for the prancing horse (Source: Bloomberg, 29 August 2018). Looking at 2017 profits, the FT suggests Ferrari trading at 22x earnings, contrasting with Aston’s proposed top-end valuation of 24x earnings.

Aston Martin is looking to achieve similar premium valuation multiples with is IPO. This is based on improving financial results, with the latest half-year report pointing to growing revenues thanks to strong demand from Asia, realigning the automaker away from reliance on its local UK market and insulating it from some of the Brexit uncertainty.

The strength of Aston Martin’s brand is without reproach and investors around the world will be salivating at the chance to own a part of James Bond’s glamorous lifestyle. Moreover, with many iconic British brands (Bentley, Rolls, Jaguar, Land Rover, Mini, etc) falling under foreign ownership, the prospect of being able to own a piece of British automotive legacy may prove difficult to resist.

If you are excited about an opportunity to take part in the Aston Martin IPO or trade the company’s shares when it goes public, get in touch with one of our brokers to discuss your options.

What’s so special about Aston Martin?

Aston Martin is an iconic British luxury sports car manufacturer. Founded in 1913, it has become eponymous with James Bond ever since he first drove the DB5 model in the film Goldfinger (1964). Secret agent 007 has helped keep car lovers entranced with the Aston Martin brand over several decades, using models (cars, not ladies) including the Vanquish, DBS and DB5 several times. He most recently used a bespoke DB10 in the film Spectre (2015).

As a purveyor of cars to the Prince of Wales, the company has had a Royal Warrant since 1985. Besides making luxury vehicles for the very well heeled, it also runs the Aston Martin Racing team since 2004 in partnership with motorsport and engineering group Prodrive.

There is also talk of the brand evolving towards electric car manufacturing to keep up with the times. To fend off increasing competition from other luxury car marques like Rolls-Royce and Bentley, Aston Martin is planning to launch a high-end electric Sports Utility Vehicle (SUV) model in 2021 under the revived Lagonda brand.

Triumphant Return

Aston Martin would be the first UK car company on the UK 100 since Jaguar was de-listed nearly 3 decades ago. Hence all the fuss about a truly all-British brand’s shares being tradeable. Based in Warwickshire, it employs around 1,850, reporting annual revenues of £876m and a welcome return to profit in 2017 (£79m) following 6 years of losses.

Having been bought from Ford for £470m in 2007, a £4-5bn IPO valuation would confirm a remarkable turnaround for the British carmaker. Having been bankrupt seven times over the course of its 105-year history it is now successfully delivering on a business plan aimed at launching one new car model every year for seven years (3 down, 4 to go), before renewing its entire range.

With its luxury/racing pedigree, next year’s addition of the DBX, its first SUV model, Aston Martin is primed to keep up with competitors and cash in on demand for luxury performance SUVs already on offer from the likes of Maserati, Lamborghini and Bentley. A more “radical” electric Lagonda SUV is also in the pipeline for 2021.

IPO Pricing

The price range for the Initial Public Offering has been set between £17.50 and £22.50 per share, suggesting a market capitalisation of between £4bn and £5bn. The final price range for the IPO may narrow the closer we get to the IPO. Accendo Markets will keep you fully updated every step of the way regarding the latest news on pricing and valuation and how to get your slice of the action.

The size of this initial offering is expected to equate to approximately 25% of Aston Martin shares. There will be no newly issued stock (therefore no dilution) with all shares coming from existing shareholders, including Italian investment fund Investindustrial, Kuwaiti group Adeem Investment and Primewagon.

German carmaker Daimler (4.9% non-voting stake following a 2013 deal to supply bespoke V8 engines and electronic components) has said it will keep all its shares and has agreed to a 12-month lock-up from the IPO date.

IPO Dates

Conditional trading (more on that below) in Aston Martin shares will begin on 3 October and the company will be formally admitted to the London Stock Exchange for public trading on 8 October.

Due to the intense public interest in the first listing of a British automaker in four decades since the company announced its intention to float (10 Sep), the initial proposed price range (20 Sep) and final prospectus (20 Sep), the offering is expected to be oversubscribed by a considerable margin.

It will be the largest UK IPO in years and with a top range valuation of £5bn, it will immediately place Aston Martin among the UK 100 index of blue-chip stocks as soon as the regular UK Index re-shuffle occurs next quarter.

Pre-IPO Options

Conditional trading takes place for a few days between the official IPO (3 October) and the full listing of the shares (8 October). Shares can be bought during this period and, despite common misconception, held indefinitely thanks to trading moving seamlessly from conditional to full trading. Shares are bought and sold in the normal manner, but conditional trading in Aston Martin shares before the IPO will be limited to institutional investors (i.e. big banks and brokerages), eligible company employees, customers and members of the Aston Martin Owners Club.

Note that if, for any reason, an IPO should be cancelled during the conditional period (e.g. share price collapses, the exchange refuses to list, the company reconsiders the listing) any trades placed during the period would be null and void (all profits, losses and trading costs) and reversed from clients’ accounts. This is, however, highly unlikely since most IPOs are fully underwritten, which means that the the investment banks take on the risk.

Post-IPO Options - how can we help?

If you are disappointed with your IPO allocation (did not get enough or, perhaps, none at all?) and still see potential for the share price to rise, you could buy additional shares on the open market. To save on costs and to manage your capital more efficiently, CFDs can often serve as an alternative trading option, as they require no stamp duty and only a 20% deposit.

Not only that, but through CFDs you can gain as much exposure to Aston Martin as you wish, regardless of availability of shares on the direct market.

Do you see future growth in Aston Martin to warrant a long position? Or do you think that there is significant demand from investors who didn’t get enough stock in the IPO to push the share price higher? Buying Aston Martin CFDs after the IPO concluded and shares become publicly traded could be an attractive option.

Alternatively, you might have missed out on a quick profit. However, you now think the hype surrounding the Aston Martin IPO is too much and now the shares are fundamentally overvalued. In which case, you could use CFDs to short-sell the shares, allowing you to profit from a decline in the share price.

Will Aston Martin share price fall following its IPO like Ferrari stock did in 2016 or gain strong upwards momentum like the shares of Chinese electric carmaker NIO after its September 2018 public offering? Find out soon!

Do you have an interest in buying or selling Aston Martin shares following its IPO? Speak to one of our brokers to discuss your options.

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Want to take advantage of the above opportunities right now?

Whether you see UK Stocks going up or down for the remainder of the year, tradable opportunities will present themselves regularly. We’re here to help you weed them out and capitalise on them. Accendo Markets can help you increase your profit potential with the use of leveraged instruments such as CFDs, a flexible alternative to traditional shares that is currently exempt from UK stamp duty.

CFDs: Like shares, but more flexible

While buying 9,561 shares in IQE @ 104.58p requires an outlay of around £10,000 plus commission, the same exposure via a CFD requires about £2000 plus commission (see right-hand box; margin + costs). If a trader invests in IQE, one would assume they believe the share price is likely to move in their favour. After considering the ‘worst case scenario’ and assigning funds to cover it, the trader may conclude there’s little point in exposing the full £10,000 to IQE shares - some of that capital could be put to good use elsewhere in the markets. (Source: CMC, Prices indicative)

CFDs are leveraged instruments, but you don’t have to use leverage

If you had, say, £10,000 to invest in the stock market, you could deposit that amount into a share dealing account and purchase shares in a company. You would pay commission to open the position, 0.5% in stamp duty and the full £10,000 will be tied up in your chosen shares with any profit or loss based on that exposure. The same £10,000 worth of exposure can be secured with a CFD for a fraction of the initial outlay thanks to leverage, with the risk and reward the same as if £10,000 worth of traditional shares were held. But should you not be interested in leverage, you can always treat CFDs like shares. Simply deposit £10,000 into a CFD trading account and take the equivalent CFD position which will tie up as little as 20%/£2000 (note that overnight financing costs will still apply). The remaining £8,000 is not tied up, so you can use some of that to take advantage of another short-term opportunity elsewhere, or simply leave it on the account to support any losses. Best of all, using a CFD means you pay no stamp duty!

What’s your view?

Think shares will rise? Take a long position by buying CFDs (buy low, aiming to sell high). Think they’ll fall? Take a short position by selling CFDs (sell high, aiming to buy low). For a more detailed rundown of CFDs, their mechanics, associated costs and some trading scenarios download our ‘Comprehensive Guide to CFDs’ here.

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This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.

Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance.

Prepared by Michael van Dulken, Head of Research
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.