Aston Martin rises after news on Geely to double its stake

Shares of Aston Martin rose when the company announced that China's Geely Automobile will treble its position and become the company's third-largest shareholder.

The British sportscar manufacturer, whose shares increased as much as 25% in early London trade, will get £95 million as a result of the purchase.

Geely will purchase 42 million shares from Chairman Lawrence Stroll's Yew Tree consortium together with 28 million additional shares as part of a £234 million transaction to buy a 17% stake in the business, according to a stock exchange filing from Aston Martin. Additionally, Geely will have the power to choose one director for the board of Aston Martin. 

The Public Investment Fund of Saudi Arabia joined Aston Martin as a stakeholder last year as Stroll attempts to bring the company around and shift to battery-powered sports vehicles. Aston Martin has always battled with cash flow.

Analysts have previously said that Aston Martin was vulnerable due to its lack of scale and shaky cash position.

According to the document, Geely committed to a standstill until August 2024 as part of the agreement with Aston Martin, meaning it won't buy any shares that would increase its ownership in the firm to more than 22%.

Bloomberg initially revealed in October 2022 that billionaire Li Shifu, who owns Geely, was trying to extend his ownership of the automaker in order to expand his relationship with the company.

Geely's extensive presence in Europe, where it controls Volvo Car and recently extended its share in French automaker Renault, has been strengthened by its purchase in Aston Martin.

(Sources: bloomberg.com, financialtimes.com)