Market stymies France’s plan to sell Peugeot shares

For the French state, the question is not whether it will sell its stake in Peugeot Citroen, but when.

Nearly 24 months after France bailed out Peugeot jointly with China’s Dongfeng Motor, the state is ready to dispose of its stake in the car maker. The company’s full-year results, slated to be released next Tuesday, will provide a gauge for the state to determine the extent of the company’s turnaround and help it decide on a possible exit.

While the state will pocket a profit of about €600m if it sells the stake now, it may have missed an opportunity to have made a great deal more by not selling the shares in May, when the stock hit an almost four- year high. Since then, an industry emissions scandal together with tumbling global markets have pulled down auto stocks. Peugeot shares have sunk 35% since May 27.

“The timing to sell Peugeot shares is plain negative,” said Saxo Bank trader Andrea Tueni. “There has been a carnage in the auto sector with the emissions scandal and worries about global growth, so selling at these levels doesn’t make sense at all.”

Peugeot shares tumbled as much as 5.1% yesterday. Peugeot, which posted three consecutive years of losses, is expected to report a profit of €1.03bn for 2015. Global sales rose 1.2% last year, led by a 5.9% gain in Europe.

“The state helped the company rebound magnificently,” Louis Gallois, Peugeot’s supervisory board chairman, said this month.

That has not prevented a slide in Peugeot shares. The tumble since the end of May has shrunk the value of the state’s stake by about €768m. Car makers are the second-worst performers in Europe after banks this year, down 21%. The sector is one of the cheapest, trading at 7.7 times expected earnings in the next 12 months.

Peugeot was rescued in February 2014, when the French state and Chinese partner Dongfeng announced the purchase of 14% each. The Peugeot family owns another 14%. An exit by the state might remove a roadblock to a partnership with an industrial group for the French car maker, including a greater participation by Dongfeng.