Renault: From €5bn Bailout to a 35% Stock Rebound

Renault: From "May Disappear" to a 35% Rally in Ten Days

The story begins with a purchase. An investor announced buying 480 Renault shares at €74.70, expecting them to reach €90. The rationale seemed sound: low P/E ratio, undervalued book value, rising revenues and margins, and a French state holding 15% of capital that was assumed would not let the company fail. The thesis wasn't bad. The timing, however, was brutal.

Years later, that position traded far below those €74.70, and the plan had shifted: buying tranches at €14, €12, and, if possible, €10. The collapse wasn't a one-day accident. Each downward step had its excuse—diesel, trade wars, cobi19—and behind it lay an uncomfortable suspicion: that electric cars are eating away the traditional business.

Why Did Renault Fall So Hard Before the Pandemic?

The prevailing narrative attributes the hit to three chained blows. First, the dieselgate, which affected half the European sector. Second, Trump's trade war, though some argue the opposite: that Renault is barely affected because it sells almost nothing in the United States. Third, a global automotive market that stopped growing after years of exceptional figures.

This was compounded by product issues. The most repeated criticism among investment enthusiasts didn't come from balance sheets, but from dealerships: a season of aesthetically questionable cars paid for in market share and, later, in stock price. The aesthetics have improved, admit those who once criticized them. The mechanics, they no longer know.

The Buy Thesis: Cheap Multiples and Institutional Money

The bullish argument isn't emotional; it's arithmetic. Renault traded with a modest P/E and below its book value, with sales growing for several consecutive years. In a valuation screen, according to one participant's calculation, barely four or five companies worldwide appeared lower on comparable multiples, and there lies the hook. The slowdown in its own forecasts was explained, under this reading, by coming off exceptional numbers and the diesel collapse coinciding with the trade war.

Added to this is the institutional factor: data circulates that a well-known Spanish value manager's fund holds a position in the stock, which always encourages latecomers. When someone with a six-figure portfolio is in, the narrative of the cheap, forgotten company gains traction.

Why Did the French Government Say Renault "May Disappear"?

Because it was negotiating a bailout and needed to justify it to taxpayers. Economy Minister Bruno Le Maire stated in Le Figaro and Europe 1 that major manufacturers were "fighting for survival" and "may disappear." Striking was that the warning came from the owner of 15% of the company.

The cynical interpretation—and the most repeated—is that the State needed public opinion to see the alternative as an abyss before injecting public money. Translated: if a company is truly going bankrupt, no one announces it; if you need to sign the check, you announce the apocalypse. With that framework, the days leading up to the loan closure became a spectacle of headlines, rumors, and stock movements.

The €5 Billion Loan and the 35% Rebound

On June 3, 2020, Renault confirmed signing a credit line of €5 billion guaranteed by the French State. That day, the stock rose around 8%, reaching €23.50. Shortly before, it traded near €17. The rebound exceeded 35% in just a week and a half, further boosted by the restructuring agreement with Nissan, European sector aid, and optimism dropped by Goldman Sachs on the stock.

The journey of those days reads like a manual on euphoria: €21, then €23.50, then €25.20, and a final €25.68 before settling back to €24.26. Those who bought at the bottom celebrated with legitimate satisfaction; those who held since €74 looked at the chart with the same face as someone watching a train leave without waiting.

How Much Did Renault Lose Due to Cobi19?

Much more than the rest of the sector. The group sold 1.25 million vehicles in H1 2020, down 34.9% year-on-year, compared to a 28.3% market drop. The company itself attributed the excess to high exposure in countries with strict lockdowns. This was added to record losses of €7.292 billion in the same period.

With these figures on the table, the question was simple: how do you sustain a 35% rally with such bleeding? Optimists respond that the market discounts the future, not the quarter; skeptics say they were inflating the price of a good-looking corpse. Neither answer can be verified yet.

The Dacia Case and the Electric Bet

Renault's defensive trump card is its budget range. Dacia, with sober models and contained prices, fits well in a crisis like the one approaching. On the technological side, the Zoe was the best-selling electric vehicle in Europe in June 2020. And the alliance with Nissan and Mitsubishi agreed that nearly half of the models will be jointly developed by 2025, with each brand referencing a specific region and technology.

Opposing this is the argument that admits no nuances: that traditional large manufacturers will disappear with electric cars and that the future has another name. It is a thesis that some participants criticize for being launched with conviction but without data, and which, according to that criticism, those who hold it rarely apply to their own portfolios with the same enthusiasm.

The detail that disorients is the usual one. The same market that rewarded the signing of the state loan with an 8% rise had not yet digested the €7.292 billion in half-year losses. Maybe everything falls into place within a year. Or maybe the stock is pricing in a rescue, not a recovery, which is not exactly the same.