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Aston Martin Lagonda Bounces Around As FD Leaves

Tim Worstall
Tim Worstall trader
Updated 3 Dec 2021

Aston Martin Lagonda (LON:AML) dropped 7% yesterday and are up again 20 pence so far this morning. The biggest fact to take away from this being that the share price is delicate. For the reason for the drop is little more than the announcement that the Financial Director is leaving after 18 months in post.

Thus can, sometimes, be a blaring red light alarm. If they’re shovelling the FD out the door then what horrors lurk in those accounts? On the other hand, if that is the case then the FD doesn’t stay on for 6 months, up to June, while the successor is found. That is what the case is here so horrors don’t have to be the reason, those personal reasons given are entirely plausible as an explanation.

So, why such movement over something that doesn’t seem very much? The reason being that the share price here is very delicate. Small things can and will move it substantially in either direction. That’s just what happens when the wider market is highly uncertain about which way this is going to turn out.

Making high performance cars has long been a difficult, tough even, business. The brand Aston Martin seems to have gone bust some 7 times in its history. This particular corporate wrapper for the brand. Aston Martin Lagonda Global Holdings PLC hasn’t been kind to shareholders. Once rights issues, capital raises, the attendant dilution, are taken into account the price was once over £100 and is not around that £14.50 level of today. Being long on that would not have been a happy time even as being on the right side of the price movement would have been most fun.

Matters haven’t been aided by lockdown of course. But the big point here is that the market as a whole just doesn’t know. What with Laurence Stoll at the wheel, Mercedes having a decent stake – and the engine supplier – we might expect some stability and the ability to make a proper go of it this time around. Or, obviously, given the history of iconic sports brands that don’t then manage to achieve high volumes – necessary to carry the development costs – perhaps not.

Calling it either way isn’t the point here – that no one knows which way to call it is. Which is what is making that share price so very sensitive to even small pieces of news like this. The FD leaving – or staying – for personal reasons shouldn’t bump a stock this size by 7%. But when there’s that much more general uncertainty over the plan as a whole then it can.

The effect of this for us as traders is that price volatility, that fragility or sensitivity to news, is exactly what we’re looking for. There’s no profit without price movement after all. The difficulty is in knowing what the next piece of news is going to be and which way that’s going to push – to a possibly excessive extent – the price. But then that’s what trading strategies are made of, working that out.

Tim Worstall
Tim Worstall is a freelance writer specialising in economics and the financial markets.