Energy subsidiary Ampere’s IPO has been cancelled

Thunderbolt at Renault. The auto group said it is canceling the IPO of Ampere, its electrical and software business entity created last November. The reason: market conditions would not be met and the group has enough cash to finance the project.

Electric car: Ampere, Renault’s risky bet

Estimated value of eight to ten billion euros

In fact, the IPO was supposed to free up new money to accelerate Renault’s electric shift and ” pay out dividends to shareholders and the group more quickly », declared Luca de Meo, CEO of Renault, in November, who expected a valuation between 8 and 10 billion euros. At the end of June, Renault already announced the postponement of this IPO to the beginning of 2024, the implementation of which should be effective in the second half of this year.

Ampere CEO Luca de Meo also warned this autumn that he reserved the right not to put his electric entity on the markets if its potential value was not satisfactory in 2024. Renault could also finance this project.” quietly with (his) means “, he emphasized. This is today’s group speech.

“Renault Group’s strategic plan, Renaulution, is self-financing. The results expected for 2023 confirm the Group’s ability to sustainably generate cash to finance its future (including the development of Ampere). Over the past six months, the Renault group has significantly improved its performance and reached a level that exceeds initial expectations. This gives the group more flexibility and all the necessary room to maneuver. As a result, given the current market conditions and higher than expected cash flow levels, Groupe Renault has decided to cancel the Ampere IPO process,” the group explained in a press release.

Renault today decided to halt the process of listing its electric subsidiary on the stock market, two weeks before announcing its financial results, and while the group has already presented its sales figures, representing a 9% year-on-year increase compared to 2022.

What about Nissan, Mitsubishi and Qualcomm?

The ruling calls into question the companies that have announced investments in Ampere.

Nissan and Mitsubishi have signed an agreement, which is not changed even by Ampere’s entry on the stock exchange », said Thierry Piéton, CFO of Renault Group in an exchange of views with journalists.

As a reminder, Nissan should invest up to 600 million euros in this subsidiary, and Mitsubishi talked about 200 million euros. Qualcomm’s investment, on the other hand, was not known but was contingent on the IPO.

Discussions will be ongoing », stated Thierry Piéton, emphasizing that the announcement had just come and that Renault had not yet had time to talk to investors.

Risks of going public

This turnaround leaves people skeptical of the group’s performances. Luca de Meo confirms this “this cancellation is not a decision that will damage Renault’s credibility” and add it “it depends on the development of Ampere”.

Several analysts feared a devaluation of Ampere during this IPO, expecting a valuation of 5 billion compared to double that announced by Renault’s CEO.

Electric car: Ampere, Renault’s risky bet

In the beginning, this IPO was viewed positively as it could bring clarity to the group. As of now, markets are uncertain due to the geopolitical context and declining electricity sales. Ampere’s IPO on the stock market may give the impression that Ampere and Renault are one and that the other entities of the group have no value. However, inThe risk is that Ampere’s valuation alone does not match the group’s investments in terms of the current market. », confirmed Gallery analyst ahead of his Capital Market Day.

Goal: 10 billion euros in turnover by 2025

We remind you that Ampere brings together more than 11,000 employees, a third of whom are engineers who design, develop, manufacture and sell vehicles under the Renault brand. In an electric car market that has exploded in recent years, the Renault subsidiary plans to sell around 300,000 cars in 2025 and a million in 2031, or half of what Renault sold worldwide in 2022. Ampere is targeting an ambitious business in worth 10 billion euros. from 2025, compared to 46 billion for the Renault group in 2022 and an annual growth rate of more than 30% from 2023 to 2031. Ampere should break even in 2025 and could distribute the first dividends as early as 2026.

At the beginning of 2024, the electric Renault 5, assembled in the north of France, will be offered from 25,000 euros. And Renault continues to draw on its repertoire: the small Twingo will be eligible for a new electric version, produced in Europe (but a priori not in France) and put on the market from 2026.” The future Twingo should be sold 40% cheaper than the Renault 5 “, Luca de Meo even hinted this afternoon. Or around 15,000 euros, if we are to believe his words. Performance made possible by sharing an electrical platform with one or more other manufacturers. At this point, the name Volkswagen has already come out.

Renault thus intends to face Asian (BYD) and American (Tesla) competition, but also the future electric Citroën C3. The new Renault subsidiary will offer a total of seven electric models by 2031, including the Mégane, Scenic, R5 and R4 (in 2025) and the Twingo.