Renault shares reversed early gains on Tuesday as investors digested the French carmaker’s decision to ditch plans to list its electric vehicle arm Ampere due to stock market conditions.
Several analysts said they viewed the news to scrap the initial public offering (IPO) as positive, noting it removed dilution risk for current shareholders and uncertainty over valuation amid challenging market conditions.
Renault (EPA:RENA) had also said on Monday it had enough cash to do without the stockmarket listing and would continue to fund the development of Ampere until it reaches break-even in 2025.
In 2022, Renault announced its intention to proceed with an IPO for Ampere in the first half of 2024, but warned in late 2023 that it would not go ahead if the valuation was too low.
“Cancellation of the Ampere IPO should be positive for current shareholders as it minimizes upfront dilution … and removes a layer of complexity in the investment case,” Jefferies analysts said in a note.
“An organic solution also avoids distracting management at a critical time for the industry and enhances management credibility on capital allocation,” they added.
Berenberg analysts said the move could be seen as positive as “shareholder feedback about the potential IPO of Ampere was generally negative, pointing to the likely dilution and uncertainties regarding valuation, value creation and value transfer between Ampere, the division’s cornerstone investors and Renault Group”.
They also noted that Renault stressed that “record margins and strong cash generation are likely to be released at the company’s full-year results on 15 February…This makes capital raised from a potential IPO of Ampere as less necessary,”
Renault’s shares were up 0.18% at 0901 GMT, after earlier rising by as much as 5%.
