Lawrence Stroll the billionaire businessman has bought his way onto the board of Aston Martin to the tune of £182 million GBP. In return for his investment Stroll gets to sit on very expensive leather seats. Stroll has a net worth of around $2.8 billion USD. Amazon founder, Jeff Bezos, has a personal fortune of $115 billion USD. Now don’t get me wrong Lawrence Stroll is unimaginably wealthy, his wealth could last his family one thousand years into the future and beyond. But the moment is now and Aston Martin’s future is on the rocks. Stroll is not wealthy enough to invest in Aston Martin, and here’s why. An automotive manufacturer can bleed money quickly if they get things wrong, even by the smallest of margins.
You have an ever depreciating asset(s) with associated overheads such as R&D, wages, tooling, etc. Being a car manufacturer is highly competitive, of course as with any industry being competitive comes with the territory. Stroll’s investment of £182 million GBP is simply not enough, maybe for the short term, but for long the long term?
Aston Martin’s second-century plan was about releasing a new car every year for the next 5 years or so. The core principle of the so-called “second-century” plan was meant to stabilise the business. Well, that hasn’t happened. Aston Martin sells around 5,000 cars per year and generates a gross revenue close to £1 billion GBP.
The problem is that Aston Martin has debts, these debts will exceed its earnings by 2021. Profits of less than 5 percent are not enough to sustain developments on future products. The banks now regard Aston Martin as high risk and have placed a 15 percent interest rate on future borrowing. That’s why Aston Martin desperately looked for alternative funding.
And that’s why Stroll’s £182 million investment is not going to be enough. To me, it suggests that Stroll is willing to flick a coin and take a gamble. Sure he and his financial analysts have looked at the company accounts, but right now Aston Martin looks risky. However, if the risk pays off then Stroll, the world’s poorest billionaire, probably got a massive bargain.
