The Aston Martin (LON: AML) share price surged on Friday after the company announced its new capital raising plan. The stock surged by over 20% and is trading at 448p, which was the highest point since June 11th of this year.
Aston Martin Saudi Arabia raise
Aston Martin Lagonda is a well-known luxury car company that has fallen from grace in the past few years. Its stock has dropped by more than 90% from its all-time high while its Formula 1 team is languishing. The team currently ranks at position 9 out of ten. It sits just above Williams, a team that has seen its better days.
In a statement on Friday, Aston Martin said that it will raise £653 million from the Saudi Arabia’s Public Investment Company (PIC). PIC will now become the second-biggest investor in the company after the group led by Lawrence Stroll.
In addition to Saudi Arabia, the firm will also do a rights issue that will see Lawrence Stroll’s Yew Tree Consortium and Mercedes Benz. The rights issue will raise £335 million. In a statement, an analyst at Bloomberg wrote:
“Net debt will be halved and removes some eye-watering 13.5% coupon rate notes, with cash burn only now ending in 2024 rather than 2023. Guidance for 2022 and 2024-25 was reiterated.”
The Aston Martin share price also rose after it emerged that some companies had rejected additional capital infusion. The firm rejected £1.3 billion equity investment from Investindustrial Group and Geely International. It rejected the offer saying that it would have severely diluted existing shareholders.
Therefore, there is a likelihood that the stock will continue doing well in the coming months despite the current dilution. The alternative would have seen the stock get more diluted or even the firm file for bankruptcy.
Aston Martin share price forecast
The four-hour chart shows that the AML stock price went parabolic after the company raised cash from Saudi Arabia. It rose to a high of 473p, which was 26% above its all-time low.
The shares have moved slightly above the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved above the neutral point at 50. It also formed a bullish engulfing pattern.
Therefore, the stock will likely continue rising as bulls target the important resistance point at 566p. This is an important level since it was the highest point on June 27th.
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