For a business that has generally disappointed since it joined the stock market in 2018, Aston Martin’s chaotic journey now takes a new direction with a legal dispute. The upshot is that the car maker is severing ties with two Swiss dealerships, it has scrapped a royalty deal and it is no longer using third parties to take deposits for special vehicles.
This causes a short-term hit to its earnings and cash flow which means Aston Martin once again disappoints on the financial front. But longer term there could be financial benefits if Aston Martin no longer hands out royalty payments for certain orders including the Valkyrie model made through one of the Swiss dealers, Nebula Project, which had helped to finance the development of the models.
“While investors may welcome Aston Martin taking decisive action to reclaim money that hasn’t been paid to it on car sales, the royalty component is likely to be hard fought in the courts, particularly as Nebula Project had stepped in to help with the financing at a time when the car maker was going through a very bad patch financially,” said AJ Bell’s Russ Mould.
“One can only speculate, but Nebula may well try and seek alternative compensation if it cannot earn royalties in the future, perhaps arguing that it played a crucial supporting role to help Aston Martin during one of its darkest hours.
“Last month it looked as if Aston Martin was starting to find its feet again as wholesale volumes picked up, leading the business to say it was making the first steps towards improving profitability. It has been clearing stock from dealerships to balance supply and demand, and its DBX SUV model has been a welcome hit for the business.
“Nevertheless, investors who signed up in the hope of profiting from owning shares in one of the world’s most famous car brands have yet to experience anything close to what could be considered normal for a business, namely successive sales and profit growth.”