KTM has been in trouble for a while now. But in its most recent financial statements, it seemed as if with a little restructuring, more layoffs, and a few changes to its lineup, things would likely even out in the next year or so. Sure, it'd be rocky ahead, but the brand's parent company, Pierer Mobility AG, would be on firmer footing soonish.
That's, apparently, absolutely not the case.
Just a few weeks after Pieirer released its Q3 financials, ones that denoted a serious drop in revenue and an increase in acquired debt (welcome to the family, MV Agusta!), the brand released another statement essentially saying, "We're truly and properly screwed if we don't find a substantial cash infusion." So yeah, I think KTM, as well as GasGas, Husqvarna, and the newly acquired MV Agusta, might get sold in the coming months if not weeks...
Now, two things stand out to me in this release, and first and foremost is that Pierer even dropped it so soon after its Q3 financials statement. That's...just not done. When a company releases its quarterly analyses, it usually doesn't follow it up a week or so later with another statement on its current financial health. They even call it an "Ad hoc announcement." So the presence of this new release is wild to see.
But within the short and succinct document, two statements stand out as eye-opening.
The first reads, "The Executive Board is currently working on securing the financing of KTM AG, in particular on a bridge financing in the three-digit million range." What that means is KTM AG, which within Pierer is responsible for the brand's motorcycle companies, needs cash, and a lot of it, just to stay around. That portion of the company is responsible for 95% of the group's revenue, and as we reported a few weeks ago, that portion of the group has seen a significant drop in motorcycle sales. And when combined with Pierer's acquisition of MV Agusta earlier this year, well, that isn't good.
The second part that opened my eyes was this, "To this end, discussions are ongoing both with the core shareholder Pierer Bajaj AG and with existing financial creditors. The aim is to agree a standstill agreement with the financial creditors involved for the duration of these discussions as basis for the financial restructuring."
While not explicitly stating that Pierer is looking to sell off a controlling stake to Bajaj, it certainly reads that way. The two groups, Pierer and Bajaj, have had a working relationship for a while now, with the latter building a segment of Pierer's motorcycles, as well as sharing technology and engineering between the brands. Bajaj also has the resources and deep pockets that could, theoretically, save Pierer from the mess it's made.
Coincidentally, Bajaj is responsible for the KTM's most popular model, the 390s.
So what does this all mean holistically? KTM is in dire straights. No, not the band with the single greatest guitar introduction ever. But in financial dire straits and the only way out is likely either a further merger with Bajaj or to sell a controlling/majority stake to Bajaj. Either way, it might be what's necessary to save KTM, and its sibling brands, from the mess of its own making.
