Independent British automotive manufacturer Aston Martin has just been bailed out from possible collapse. The company was rescued from going under by a $656 million bailout organized by Formula 1 billionaire Lawrence Stroll.
Aston Martin officially announced the bailout on Friday, stating that Stroll had led a group of investors to come up with the money. The group is reportedly willing to pay up to $239 million to buy a 16.7 percent stake in the company. Meanwhile, the rest of the amount will be raised through the release of new shares, most of which will be bought out by Stroll and his partners.
The Canadian billionaire and part owner of the Racing Point Formula 1 team plans to become the new executive chairman of Aston Martin once the deal is done. Stroll aims to turn around the company, which has struggled amid weak global demand for its models and the overall slowdown in the global car market. In 2018, Aston Martin's operations and its shares were heavily affected by uncertainties brought about by Brexit.
Stroll mentioned in a statement that he believes his experience and the added capital should allow him to fulfill the company's potential. The prolific investor does have a good track record of making good bets in both upcoming and troubled companies. Stroll was an early investor of popular global brands such as Michael Kors, Polo Ralph Lauren, and Tommy Hilfiger.
Aston Martin's share prices took quite a beating earlier in January after the company announced that it expects its profits to fall by nearly 50 percent when compared to the previous year. The announcement managed to unnerve investors who had expected a lot from the company given the healthy orders for its first-ever SUV, the Aston Martin DBX.
According to Aston Martin's outgoing chairperson, Penny Hughes, the injection of fresh capital will reportedly be used to ramp up production of the company's new SUV. As for its electrification plans, the company revealed that it would be delaying investments on that particular front sometime in 2025.
In response to questions regarding its sale share and overhaul, Hughes explained that the company's financial market performance in 2019 severely decreased its liquidity. For this reason, the company was forced to seek substantial equity financing. Hughes added that without fresh capital, Aston Martin could not continue its operations.
Following the news of the bailout, Aston Martin's shares surged by more than 30 percent in London. Despite the jump, the company's shares are still 75 percent below its initial IPO price. Since it's listing in October 2018, the company has managed to lose a total of $3.9 billion in value.
