Shares in Aston Martin fell nearly 16% after the British sports car maker revealed it would take a deep discount on a £576m rights issue as it tries to reduce its huge debt.
The luxury carmaker revealed on Monday that investors could buy more shares at 103p per share, a steep 78% discount to Friday’s closing price of 480p. Its shares closed up 15.6% at 405p in the early hours of Monday.
The rights issue was first disclosed in July as part of a total fundraising of £650m, with Saudi Arabia’s Public Investment Fund (PIF) becoming the second largest shareholder through a share placement.
Lawrence Stroll, the billionaire fashion mogul who led the 2020 bailout, previously said he was not concerned about taking investment from the PIF. The fund is led by Saudi Crown Prince Mohammed bin Salman, who US intelligence alleges ordered the 2018 killing of journalist Jamal Khashoggi.
Aston Martin hopes the money will allow it to reduce debt payments and invest in new electric models. The company has lagged behind some rivals in working on electric cars, relying instead on sales of gasoline-powered sports cars and newer SUVs.
The company’s shares have lost nearly four-fifths of their value over the past 12 months as it has struggled with high debt payments and stubbornly low sales, as well as supply chain issues it faces companies around the world.
Aston Martin shares started trading at £19 when they listed on the London Stock Exchange in October 2018. However, it has seen a torrid time since then under three different chief executives.
High listing costs necessitated a bailout in early 2020. That bailout came just as the coronavirus pandemic began, forcing its factory to close and forcing it through a painful period of downsizing of cars owned by dealers.
The loan he arranged during that bailout left him with “a significant debt load and associated interest costs,” dragging down profitability, he said Monday.
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It said there was a “challenging operating environment, affected by the war in Ukraine, Covid-19 lockdowns in China, as well as ongoing supply chain and logistics disruptions”.
Aston Martin said it had made operational improvements, including reducing the cost of manufacturing a car by 20% and increasing the visibility of the company’s brand by lending its name to a racing team in Formula 1.
The company aims to produce 10,000 cars a year and generate positive free cash flow by 2024.