Will Bahrainis Pay McLaren's Bills before its IPO Again?

2022-07-17 - 5:13 p

Bahrain Mirror (Exclusive): Bahrain holds the largest stake in a British luxury sports car manufacturer. However, this company is facing significant financial difficulties as well as challenges in the automotive industry in general.

Bahrain says it is considering making the company public, but this will depend on the outcomes of the company's future operations, and the question here is: Who will finance these future operations? The answer is: it is most likely to be financed by the state treasury and at the expense of public interest projects.

In detail, the CEO of Mumtalakat said the company does not rule out McLaren Group going public, noting that this could happen within 3 years. 

Mumtalakat owns an estimated 60% stake in the group that produces luxury sports cars, as well as its ownership of the McLaren F1 car team.

"The automotive sector clearly has challenges, but we have confidence in the company, and we think it will be a major candidate for an initial public offer," Al-Rumaihi said in an interview with Bloomberg. 

However, Al-Rumaihi did not provide reasons for confidence in the company recording losses of about $1 billion and net debt of about $561 million last year from 2020.

Analysts say the company needs to work on a strategy to develop hybrid cars in order to return to profitability. 

Car production accounts for about 80% of the company's revenues, so it has to spend more in this area.

Car sales fell by nearly 60% in 2020, causing the company significant losses, forcing Mumtalakat to lend the company about 300 million pounds ($363 million) from Bahrain's National Bank treasury.

It is not known whether Mumtalakat intends to inject more money to help the company in the development process, which includes the production of fully electric vehicles.

The company hopes that its sales reach 2,000 vehicles by 2025, a figure that will allow it to return to profitability.

It is clear from this data that Mumtalakat tends to make an initial public offer after the company moves to profitability or at least returns to balance to motivate investors.

This is reinforced by Al-Rumaihi's assertion that the initial public offer will not take place before 3 years. 

However, it's important to know whether the company's planned developments, with Michael Leiters taking over as CEO this month, will be funded by the Bahraini government's treasury or another source? 

Mumtalakat's record is full of support for loss-making companies that are draining the country's budget, such as the Bahrain Racing Circuit, Gulf Air and others.

The company acquires all Bahraini non-oil assets and contributes only 10 million dinars a year to the state budget and cannot transfer its profits to expansion operations, and the expansion of McLaren may be one of the new losses.

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