Aston Martin fuelled by Saudi Arabian cash

Saudi Arabia’s Public Investment Fund has injected £78m into Aston Martin and will take part in a separate £575m rights issue, making it the carmaker’s second-largest shareholder, with 17% of the shares and two seats on the board.

An Aston Martin
(Image credit: © Aston Martin)

Aston Martin’s shares jumped by a fifth last week as investors celebrated a capital injection from Saudi Arabia. The luxury carmaker “will raise £653m via a placing and rights issue”, with Saudi Arabia’s Public Investment Fund (PIF) injecting £78m into the company and agreeing to take part in a separate £575m rights issue.

PIF will thus become Aston Martin’s second-largest shareholder, with 17% of the shares and two seats on the board. Executive chairman Lawrence Stroll argues that the deal “is needed to tackle Aston Martin’s oversized balance sheet”, with about half of the new funds put towards debt reduction, says Lex in the Financial Times. It should also give the company “more headroom to launch planned models”.

Still, all this will “not come cheap”. The Saudis will get a 25% discount for their first £78m of shares. Minority shareholders are being required to contribute £150m, a tall order given that those who invested in the initial public offering in late 2018 incurred losses of 96% . Those who refuse will be diluted by nearly 60%.

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Investors should think hard before being “suckered by this road trip” again, says Alistair Osborne in the Times. While Stroll has improved operational performance, this isn’t a big deal as “the previous regime had flooded dealers’ forecourts with motors that they had to discount to shift”.

And the group is still burning cash at an alarming rate. In any case, who “wants to be a passenger in a corporate vehicle that shouldn’t be a public company”, now partly owned by “the human rights disaster that is Saudi Arabia”?

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Dr Matthew Partridge
Shares editor, MoneyWeek

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri