Oh yeah, Brexit. If only there’d been something in the news about that 
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Electric future plans
I have no idea how to value a traditional luxury car company or calculate a proper intrinsic value or a giant, such as VW or whatever, in today’s ever changing world. But one thing is certain—you have to consider the years 2030, 2035 and 2040, at least in the UK, when the sale of fossil fuel-powered cars is [scheduled to end](The UK wants to put electric car charging points in all new homes to support EV adoption | Electrek) (Electrec).
The UK is promoting the legislation as the first of its kind in the world as it moves to increase electric vehicle adoption. Sales of new petrol and diesel cars are set to end in the UK by 2040, and there’s been talk about moving that deadline up earlier, to 2030 or 2035.
According to the BBC , the committee believes electric cars will cost around the same as diesel and petrol cars by 2024-25, and sees 2030 as a “feasible” date to ban sales of ICE cars. Setting an earlier date would do more to ensure diesel and petrol cars are off the road by 2050, when the UK government is aiming for zero carbon emissions in total.
Also, here’s what Aston Martin has to say about its electric stuff—they are working on Tesla competitor called Lagonda or something(source: DrivingElectric) (NOTE: so are Daimler and just about everyone else):
JC: "They’re primarily existing Aston Martin owners, wanting more luxury. The pinnacle of electric cars right now is the Tesla Model S and X and we’re seeing customers who currently have an Aston Martin DB11 and a Tesla. They want to combine the best of both worlds and own something truly exquisite that they can still use; the Rapide E does that.
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“For Lagonda, the engineering teams are still working on what the final battery solution will be. The industry is changing every day; it has changed massively even since we started Rapide E. So it’s not necessarily a Hyperbat battery that will go into the Lagonda, but it’s a possibility.”
… Lagonda will be the first luxury electric-only brand. Who knows in the future, but there won’t be another Aston Martin purely electric car for a while – the focus there is on hybridisation."
They say at the end there that they won’t be 100% electric, focussing more on the hybrid market?
I find that an interesting compromise for them. Makes them different to Tesla, can’t help but feel it’s a bit backwards however.
Crazy that the IPO raised no new contingency funds for Aston Martin themselves. Just a private dump onto public market:
Classic earnings management (saturating wholesaler showrooms) ahead of the IPO:
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Average company, bad balance sheet. At least the F1 team it is sponsoring is doing OKish (and they get their money from selling a number one energy drink).
If you read one book this year about investing, get Peter Thiel’s Zero to One. But it’s not really about investing—it can teach you to spot a good business and how to set up one or become a unicorn. He’s invested in SpaceX, Tesla and “co-founded” PayPal back when there was no e-payments in the 1990s and used to compete with Elon Musk’s X.com before he merged his Confinity with X. The lesson—if a customer has a choice no matter how “niche” you think your business is, you’re like a Michelin-star rated restaurant (they can’t scale, have to survive, have to compete with a local takeaway shop and even McDonald’s). Tesla has this problem too but so far it’s had a loyal customer base (and has not relied on advertising).
Aston’s competitors are not just the Lambos and Ferraris. It’s the VWs and BMWs who make nice-looking top market cars. Aston is a not a “zero to one” company, it’s “one to many”. Red Bull is a zero to one company despite the illusion of “competition”.
Forget EPS and prestige, look at the balance sheet
If you have access to investing into top private equity funds, do that. Their portfolio companies are just like those drivers you can summon via an app.
The PE owners, unlike venture capitalists and angel investors, typically put little cash and lots of debt on the company’s balance sheet after a takeover—it’s called a leveraged buyout (an LBO). They don’t have much skin in the game. With that kind of leverage, a PE company can invest a small amount of own equity (cash) and a large amount of debt that puts pressure on the company itself. When a PE company cashes out via a sale to another PE firm, a different company, or an IPO, PE guys can get a juicy return. Who cares about the portfolio company (read: Aston).
Aston has a ton of debt—about £700m at the end of last year (see pages 185-186 in the annual report… note, they have released 1st quarter earnings too). In the worst case scenario, a company that cannot service interest payments or cannot further refinance the debt, it has to restructure and a lot of equity holders get wiped out.
The debt back then was mostly made up of the so-called high yield bonds—usually issued by companies with a speculative (junk) credit rating/creditworthiness. They totalled $400mln and £230mln (+ another £55mln). They won’t mature until 2022 but until then Aston has to find either: a) another owner—an auto company, for example—who can buy the company with cash and repay the debt; 2) new high yield bond investors to refinance that sort of unsustainable debt during 2020-2022; 3) a bank that would be willing to refinance the high yield bonds with a loan.
Meanwhile, the company has to make sure it is performing well. Otherwise, it’s corporate and debt restructuring time.
The CEO was paid nearly £1mln in 2018.
Disclosure: never owned shares in Aston 
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Hitting new lows today at 460
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i made a meme
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In this metaphor they’d have the windows rolled down as well
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Thanks this is excellent.
The constant refinancing of debt is worrying; curious to know what their cost or capital is with the shares included seeing as they have shareholders who will likely want dividends in the future.
I would guess they might do another equity issue to pay off the debt rather than refinance, but that’s obviously lead to dilution etc as noted.
Just looks a shocker all round in line with your note that the company didn’t really get any of the money from the IPO. I was tempted to jump aboard but definately going to be staying away. Might be worth a bit as we get closer to brexit and know whether no deal is possible - they seem to be pinning their hopes on the SUV which indeed would sell quite well
https://www.esquireme.com/content/37989-aston-martin-now-offers-a-bespoke-supervillain-lair-service
Aston Martin Partnerships Director Sebastien Delmaire outlines more detailed possibilities below:
“Aston Martin has decades of expertise in staging cars in order to present them at their absolute best but also understands the importance of storage and maintenance of these living, breathing machines. Automotive Galleries can even be designed to fit the era if a customer has a heritage car. We are able to cover every requirement, whether it is to display single cars as pieces of automotive art or a full collection of cars in a private museum. These spaces provide an opportunity for people to create their own unique world where they can share their passion for cars with their guests. The opportunities are endless.”
There’s no word a release date on this service, or on pricing, though we have a feeling that if you have to ask, you can’t afford it.
LOL?
In October of 2018, Aston Martin reported that it had sold the tooling and intellectual property of the Vanquish to a mystery buyer for $26 million. Now, Aston Martin has reported that the mystery buyer was Detroit Electric and, well, Aston shareholders may not actually be seeing most of that $26 million.
According to Automotive News Europe—and spotted by Motor1—the company submitted a provision for doubtful debt of 19 million British pounds. Essentially, they’re saying that they no longer expect to make the money they reported as income when the deal was inked.
Detroit Electric, which the name makes totally clear is based in Hong Kong, was supposed to receive the plans, equipment and consulting expertise required to turn the Vanquish bodywork into a new EV. But by the time the deal was reported, the company was already late on its payments.
…
From the story:
With contracts inked, Aston Martin said it expected the cash to arrive in 5 million pound twice-yearly installments. In hindsight, it was not a good sign that the first of these payments was already overdue at the time the prospectus was published.
More than a year after the contract was agreed, Aston Martin has acknowledged that it may never recover the bulk of the money. A disappointing set of results published last month included a one-off 19 million pound provision for doubtful debt.
[…] Attempts to reach Detroit Electric for comment were unsuccessful. The latest available accounts of Detroit Electric’s UK subsidiary show a loss and net liabilities for the 2017 financial year, while indicating that financial support from group companies remained available.
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I think Aston should follow Picard’s management tips:
After an initial deal went sour, Aston Martin is still looking for a buyer for the complete production kit for its Vanquish.
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3% of shares being bought back for £10 per share… over twice the current market price
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Turns out we got lucky with our free Aston Martin share after all 
Although does slightly make me regret not having bought more so I could have made a bit more from it but oh well. At least I’m guessing that any shares bought now won’t be entitled to this offer.
Either that, or they will but only up to a maximum of 3% of your holding will be eligible at that price
The message I got from FT does say 3%, but also does state it could be more depending on how much interest there is.
Also FT doesn’t do fractional shares it’s impossible for them not to buyback whole shares if you have a very small amount, e.g. In my case only having 1 share should guarantee me £10. You’d need around 34 shares for them to turn you down 1 share as it’s just over that minimum limit.
Although as someone has pointed out to me, the aftermarket value has just shot up to over £5, and it’s likely to hit £10 come Monday…
Seen as Aston Martin is still trading under £10, can anyone confirm if we were to buy shares now would we still be eligible for the 3% offer?
Aston Martin to issue more unsecured bonds - rated CCC. That’s close to D, which stands for “default”:
The potential debt issuance will be unsecured and rated CCC, according to two of the people, who are not authorized to speak publicly and asked not to be identified. That would give existing bondholders a buffer given the company’s outstanding notes are all secured.
Source - https://europe.autonews.com/automakers/aston-martin-said-weigh-new-bonds-cash-pressures-mount
They got downgraded by Moody’s to B2, stable in July - a very “junk” level territory in terms of creditworthiness:
“The downgrade of Aston Martin Lagonda’s ratings reflects the lack of progress in terms of volume growth and profitability for 2019, following the company’s trading statement, and hence continued high negative free cash flow and high leverage”, says Tobias Wagner, VP - Senior Analyst at Moody’s. “AML’s weaker performance in 2019 raises the stakes for a successful execution of the upcoming SUV DBX launch. Also given the ongoing weak and competitive market environment, Moody’s now considers it unlikely that leverage and free cash flow will be in line with a B2 rating by 2020.”
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Moody’s considers the company’s liquidity profile currently as adequate, but the company’s large negative free cash flow (after capex, interest) for 2019 and likely continued negative free cash flow in 2020 mean cash balances will fall fast from current levels. As of March 2019 and pro-forma for the $190 million notes issuance in April 2019, the company carried GBP280 million of cash. The committed GBP80 million revolving credit facility due January 2022 is essentially fully drawn. As of December 2018, the company had GBP 29 million of short-term debt (aside from the revolver) and the next larger maturity would be the notes in April 2022. Given the continued need to invest into its future model line-up and lack of growth, the company’s liquidity profile has weakened in Moody’s view.
Source - Moody's - credit ratings, research, and data for global capital markets
The yields on bonds in July were close to 9-10%:
The yield on the carmaker’s £285m bond maturing in 2022, which was issued in 2017, climbed 0.48 percentage points to 8.67 per cent as investors sold the debt. Investors also moved out of the company’s $400m bond with the same maturity, sending the yield up nearly half a percentage point to 9.82 per cent.
So, is this car going to turn Aston Martin around?
It’s their ugliest ever!
Something about it reminds me of the Porsche Macan. Meanwhile the new Ferrari Roma reminds me of Aston Martin