McLaren listing

McLaren listing: what you need to know

The anticipated McLaren listing is 2021’s hot topic. There has already been a round of funding from a group led by MSP Sports Capital, which is said to have obtained a significant minority stake in December 2020.

The group will inject around £185 million over a two-year period into the car manufacturer’s racing division. McLaren hopes this will be enough to keep it at the front of the pack during the Covid-19 pandemic and the subsequent economic recovery.

There are also rumours that the company plans to go public through a reverse takeover. The carmaker is considering a deal with a special purpose acquisition company (SPAC), which will enable McLaren to go public as a means of raising funds.

McLaren is in the process of a wider restructuring in order to reduce its debt levels. The company plans to raise between £300 million and £500 million in a fresh equity injection in order to pay down debt, before refinancing its bonds in 2021.

McLaren IPO vs reverse takeover

Reverse takeovers happen when a private company merges with a public company. McLaren is opting to go public through a reverse takeover as it will enable the company to list shares without sacrificing the time and money it takes to list shares on an exchange. The deal with MSP will not only facilitate a listing, but it will also give McLaren the boost it needs to reduce its debt.

In short, a reverse takeover is a shortcut for a company to become publicly-listed. It happens much faster, costs less, and does not subject a company to the same regulatory scrutiny that would be required for a conventional IPO.

What is McLaren's business model?

McLaren’s business model is focused on three key divisions: McLaren Automotive, McLaren Racing and McLaren Applied (technology sector). With innovation at its core, McLaren continues to diversify its business interests – and it’s this approach that has led to partnership with companies that could help it solve industry-wide challenges, including GlaxoSmithKline (GSK) and Deloitte.

Since McLaren’s racing arm was born (1963), it has won more than 180 Formula 1 races and 20 World Championships. As at December 2020, McLaren has 12 vehicle models for sale.

How has McLaren been performing?

McLaren’s interim results for the nine months ended 30 September 2020 revealed that revenue was down 61% (£389.2 million) from the same period in 2019 (£619.8 million). The decline has been attributed largely to Covid-19, as there was no income from race tickets or hospitality packages (McLaren Racing) and there was a reduction in vehicle wholesales (McLaren Automotive).

Gross profit for this period was down from £280.3 million to £15.2 million. On a more positive note, existing shareholders provided a £300 million equity injection prior to Covid-19, which funded the updates to McLaren’s five-year business plan.

What could the McLaren share price be?

It is not yet known what the McLaren share price could be when shares float, nor how many shares it will offer to the public.

The recent deal with MSP means McLaren could be looking at a valuation of around £560 million.

Who are McLaren's competitors?

McLaren’s competitors are Ferrari, Lamborghini, Porsche, Maserati and Tesla to name but a few. Out of these, Ferrari (RACE) and Tesla (TSLA) are directly listed.

In December 2020, Ferrari’s chief executive officer (CEO) quit, which caused the share price to dip slightly, but it made a swift recovery – confirming investor confidence. TSLA has had its fair share of growth in recent years, increasing by more than 700% from December 2019 to December 2020.

How do IPOs work?

IPOs work by having companies list their shares – market participants can then buy or sell the shares on the open market.

A company could list its shares for a number of reasons – these include raising capital to fund expansion, attracting and retaining talent, paying off debts, or improving liquidity.

The IPO process starts with the company making arrangements for a third party to conduct a comprehensive audit, in which all the company’s financials will be considered. Thereafter, it needs to get a registration statement ready to file with the relevant exchange commission. If the commission approves the registration, the company will list a specific number of shares on a stock exchange, at a price determined by an investment bank.

Explore what IPOs are or find out how to trade pre- and post-listing

What are the risks of trading or investing in an IPO?

All trading and investment activity involves risk. IPO-specific risks include:

• Lack of important information on a company such as news and legal proceedings that might affect the share price
• Little to no trading history to base decisions on
• Performance that doesn't match up to market expectations
• A company getting a valuation that’s lower than the one it targeted

By staying informed about the company and all details that might affect its share price, you’ll be avoiding risks that could affect your positions. In the case of IPOs, useful documents include company prospectuses and admission documents.