(BFM Bourse) – The manufacturer has the smallest capitalization of the CAC 40. This raises questions about the future of the manufacturer in the medium term.
6.8 billion euros this Friday. The market capitalization of Renault is today the smallest capitalization of the Parisian flagship index, a capitalization very far from those of its competitors (43.2 billion euros for Stellantis for example). A direct consequence of the war in Ukraine – Renault’s share price has lost 27% since January 1 (and 39% in one month) – this small capitalization does not prevent the manufacturer from continuing its operations.
But with a valuation barely higher than in the spring of 2020 (5.3 billion euros on May 26) when Renault was in very great financial difficulty, the signal is nonetheless negative. Especially for the future. “Renault is worth six billion euros, it’s nothing, summarizes Jean-Pierre Corniou, automotive specialist at Sia Partners. The group is not directly OPAble, but this fragility is dramatic”.
The group indeed seems protected by the composition of its shareholding with in particular the double voting rights of the State (15% of the shares, but 30% of the votes). Several observers even question the idea of a possible takeover of Renault by another group. The concrete functioning of the Alliance, the relationship with Nissan, but also the weight of the industrial tool and the changes to be made there to move towards a 100% electric world would represent too many obstacles for a possible new buyer. But at only 6.8 billion, isn’t Renault too small in the face of current challenges?
A limited ability to raise funds
The group is changing to become a 100% electric manufacturer. The manufacturer had thus announced on June 30 a plan of 10 billion euros by 2025 for the release of ten new models of electric cars. “The first threat is the ability to raise financing on the markets to carry out its plans”, explains a connoisseur of the sector. In practice, this does not prevent Renault from continuing to operate, but it can induce higher interest rates and fewer options for easily raising funds on the markets or even carrying out buyback operations.
The amount of capitalization is in fact interpreted as the confidence that investors have in a strategy and in the company’s ability to carry it out. And therefore to embody the future. Hence the high valuation of electric car companies, including the stratospheric Tesla ($866 billion). Can Renault embody this future? The war in Ukraine also comes after a series of crises for Renault: the difficulties in what were called the BRICs (Brazil, Russia, Iran and China), the crisis of governance after the departure of Carlos Ghosn and the financial difficulties, then the Covid pandemic or the panic around semiconductors.
The situation of the manufacturer in Russia raises a legitimate question, posed in The world: is not the crisis too much for the manufacturer? And a specialist to recall that without Nissan, the valuation of Renault would be equivalent to 300 million euros, a sign it seems that the markets have sanctioned this strategy of Renault for a long time.
Pauline Ducamp for BFM Bourse
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