Virgin Australia IPO Discussion

[JessicaTam]

The IPO has been announced.

Virgin Australia gets $685 million IPO ready for take-off

Qantas’ biggest rival has kicked off its return to the Australian sharemarket after more than four years’ absence.

www.smh.com.au

 

[justinbrett]

So QR has lost 25% on its investment if it’s valued at these rates (US$386M), after paying US$513M.

 

[ChrisBNE]

 

[Blackswan]

What's the saying, a fool and his money...?

 

[kamchatsky]

Wow. Very surprised given that there is not much time to organise the re-listing. I guess it is institutional investors only?

 

[Bagpuss]

Virgin Australia gets $685 million IPO ready for take-off

Qantas’ biggest rival has kicked off its return to the Australian sharemarket after more than four years’ absence.

www.smh.com.au

Ownership

Bain - 40%
Qatar - 23.4%
Management - 6.4%
Listed on stock market - 30.2%

Equals - 100%

Unsure what happens to existing minority shareholders Virgin Group and QLD Government. I assume they are allocated shares from the "listed on stock market".

 

[odysseus]

Wow. Very surprised given that there is not much time to organise the re-listing. I guess it is institutional investors only?

Also a retail component, completing by Friday.

 

[moa999]

Not a surprise with QAN at near record highs. Briefly crossed $11 for the first time yesterday, and trading on a forward PE of above 8.5x, making the Virgin float at a discount to its main comp.

 

[anat0l]

So QR has lost 25% on its investment if it’s valued at these rates (US$386M), after paying US$513M.

Oh well, they have plenty of money. And hey, it can only go up from here, right? It's not as if they were betting on a chestnut

 

[ozstamps]

Qatar appear to have spare luxury 747s to give away, so money means nothing to them it seems.

If their brand new 'good mate' they gave the 747 to, pulls any more crazy Tariff stunts in 3 weeks when they float, BAIN will not be happy it markets hit freefall once again.

 

[Daver6]

So QR has lost 25% on its investment if it’s valued at these rates (US$386M), after paying US$513M.

They haven't lost until they sell their shares. Maybe they're in it for the longer game than PE.

 

[SYD]

They haven't lost until they sell their shares. Maybe they're in it for the longer game than PE.

We have no idea how much QR actually paid for 25% and how much might have been effectively a licence fee for extra slots, that’s offset by the cost of VA “paying” the wet lease costs.

The IPO should be interesting reading!

 

[justinbrett]

We have no idea how much QR actually paid for 25% and how much might have been effectively a licence fee for extra slots, that’s offset by the cost of VA “paying” the wet lease costs.

The IPO should be interesting reading!

Yes we do, it was disclosed as per the linked article in my post. US$513M.

The money went to Bain not VA, so there is no offsetting for future lease costs. That would effectively be QR bribing Bain to take a certain course of action with its management of VA, which is of course illegal.

 

[SYD]

Yes we do, it was disclosed as per the linked article in my post. US$513M.

The money went to Bain not VA, so there is no offsetting for future lease costs. That would effectively be QR bribing Bain to take a certain course of action with its management of VA, which is of course illegal.

Or just paying a premium because they couldn’t bribe others…

Point being it was NEVER an amount based on company valuation….

 

[justinbrett]

Point being it was NEVER an amount based on company valuation….

Oh no argument there, I said as much many times up thread.

Some here were saying that is the case.

 

[RooFlyer]

They haven't lost until they sell their shares. Maybe they're in it for the longer game than PE.

Yes of course. Comparing what QR paid to what the punters and instos will be paying in an IPO just doesn’t work. For instance, the power and influence QR has as a single shareholder versus all the other single shareholders comes with a premium. AKA the 'control premium', completely normal in circumstances like this.

I mean, surely no one thinks that QR hasn’t had substantial input into the IPO pricing? QR are not some third-party sitting out on the metaphorical wing. They are completely inside the decision making process in VA.

 

[RooFlyer]

What's the saying, a fool and his money...?

I don’t suppose you’ve read the prospectus?

 

[justinbrett]

Yes of course. Comparing what QR paid to what the punters and instos will be paying in an IPO just doesn’t work. For instance, the power and influence QR has as a single shareholder versus all the other single shareholders comes with a premium.

So we can agree that the “yardstick” was off 25% from the actual value?

I mean, surely no one thinks that QR hasn’t had substantial input into the IPO pricing? QR are not some third-party sitting out on the metaphorical wing. They are completely inside the decision making process in VA.

Would this not have been a Bain decision not a VA decision? It’s Bain selling off its shares, not raising capital for VA. Feel free to correct me if I’m wrong on that.

But good to see the debate has come full circle to what I said originally (although the earlier reports of 1B were way off):

Only worth what someone is willing to pay for it - making an assumption about total valuation is flawed, especially for a company with minimal tangible assets.

That said QR is likely motivated for its own self interest and isn’t too concerned about the actual investment. 1B for Qatar is loose change.

 

[RooFlyer]

So we can agree that the “yardstick” was off 25% from the actual value?

No. You pay a premium for control amongst other things. Its a yardstick, not a proportionality.

Would this not have been a Bain decision not a VA decision? It’s Bain selling off its shares, not raising capital for VA. Feel free to correct me if I’m wrong on that.

I think the decision would be one of the board of the Virgin holding entity. Without looking at the nuts and bolts of it, that would consist mainly ( or exclusively) of Bain and QR people.

I think it depends if they issue new shares or divide the shares already held by Bain and QR and sell a proportion of those. That might have been reported in one of recentl articles but I’m travelling and haven’t read them yet. There might be a clause in Branson‘s ownership that says he cannot be diluted.

The prospectus will tell us ( it must) the sources and uses of funds. As I’ve said elsewhere, in the private company that I took through IPO, 100% of the funds raised went into company activities not the existing shareholders. But there are lots of different ways you can slice up the pie.

 

[justinbrett]

No. You pay a premium for control amongst other things. Its a yardstick, not a proportionality.

That whole debate was based on a member extrapolating the 1B investment x 4 for the value of VA, which I disagreed with. But it seems we are now in agreement (rare I know).

The articles so far suggest it’s a sell off of Bain’s shares with no change to other investors. They say Bain will be a minority shareholder when complete, going from around 70% to around 40%.