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Summary
- Toto Wolff, 30 per cent owner and boss of Mercedes F1 team, had earlier purchased a stake in the new Aston Martin F1 project.
- Incidentally, other car manufacturers in the UK have done poorly in September as the car sales figures hit a 21-year low in the UK.
- Recently, there was news about F1 driver Sebastian Vettel leaving Ferrari and joining Racing point in 2021, which is all set to be rebranded as Aston Martin.
The shares of Aston Martin have been on a positive trend over the past few days even as the rest of the car industry in the UK is in a deep slump. The company, which has seen a number of big names in the F1 racing world, is set to formally enter the F1 stage in 2021 when Canadian billionaire owned F1 racing team Racing Point is renamed as Aston Martin.
This news has been bringing positive shareholder reaction to the luxury car making company, which was in dire straits a few months ago as its financial performance had brought it to the brink of bankruptcy.
Meanwhile, the UK car industry displayed a very weak sales performance in September 2020, which was its lowest in the last 21 years. Other than the interest of top racing world personalities in Aston Martin, its placement in the top-end luxury segment of the car industry seems to be the reason that has protected it from the current state vagaries the industry is reeling under.
The new F1 racing order
There have been a few big racing world personalities entering Aston Martin in recent times. Earlier this year when the company was on the brink of bankruptcy, the Canadian billionaire and car racing enthusiast Lawrence Stroll led a rescue deal to pump in $238 million in the company. The deal gave the consortium 16.7 per cent shares in Aston Martin and paved the way for its F1 racing team Racing Point, which was raised in 2018 and will be rebranded as Aston Martin by 2021.
Former F1 driver Toto Wolff entered Aston Martin in April when he picked up 4.95 per cent of the company's shares as an investment. Wolff, who is the CEO and Team Principal of Mercedes AMG Petronas Motorsport Formula One team, has been making financial investments in competing F1 teams. He holds a 30 per cent stake in Mercedes AMG Petronas Motorsport Formula One team. In recent times, he has been actively promoting and supporting the interests of Aston Martin’s F1 ambitions.
He recently said that former Ferrari driver Sebastian Vettel will be joining Aston Martin and taking up a stake in the company. Wolff is known to have been speaking to Vettel for a while now on this and encouraging him to join Racing Point for the 2021 season.
The association of such big names with Aston martin will bring credence to the company and help it generate and maintain adequate investor interest.
The bankruptcy rescue
In 2018 and 2019, the company made some major capital investments to bring online new production facilities. However, at the beginning of 2020, the company got into a major cash crunch, forcing it to the brink of a bankruptcy for the seventh time in its lifetime.
Stroll spearheaded a rescue deal to bring the company out of the financial mess and brought a funding of $238 million, against 16.7 per cent of the company's shares.
As a result of the deal, CEO Andy Palmer stepped down on 26 May and was replaced by Tobias Moers of Mercedes- AMG. The chief of manufacturing operations in the company, Keith Stanton was promoted to be the interim Chief Operating Officer.
UK car industry and the pandemic
The sales of new cars in the UK in September has been the weakest in 21 years as per the data published by the Society of Motor Manufacturers and Traders. September usually witnesses bumper sales, but this time it saw very poor sales as consumers were cautious about making any large spending. As against the sales of September 2019, the numbers for this year were lower by 4.4 per cent with 328,041 vehicles being sold.
It is to be noted that the car industry has not only been marred by the coronavirus pandemic but also by the increased environmental regulations on petrol and diesel vehicles which have lowered their availability and sales. Over the past few years, the UK has been aggressively promoting electric vehicles in order to deliver on its commitment to lower the country's overall carbon footprint targets. The regulatory measures and emission standards that have been put in place to achieve that have pushed out several popular models from the market and have made the rest very expensive. Besides, people have also been very receptive of electric vehicles in the country, as their numbers have been increasing exponentially.
Share price performance of Aston Martin Lagonda Global Holdings Plc (LON: AML)
Source- Thomson Reuters.
Over the past six months, the shares of Aston Martin Lagonda Global Holdings Plc (LON:AML) have performed relatively poorly on the London Stock Exchange. However, they have marginally moved up since 1 October 2020 when they closed at a value of GBX 50. As on 6 October 2020 (2.35 PM) the shares of Aston Martin Lagonda Global Holdings Plc were trading at GBX 51.80 per share gaining 3.6 per cent over the previous days close.
