Virgin Australia IPO Discussion

[Saab34]

I think VA needs a lot of capital investment to take on what Qantas will be in 10 years time when they finally have some new planes.

What difference will new planes make? Fares won’t be coming down. It’s about improving margin.

I really don’t think the landscape will be changing much in domestic. I don’t believe Virgin is at risk by competitor activity in the short or medium term. The competition have margin targets they have put to market which are much higher compared to today, they will get there by having newer aircraft, not by adding extra capacity or going into fare war mode.

 

[RooFlyer]

Some snippets from media.

Joe Aston's Rampart newsletter

Not a dollar of the $680 million float proceeds will be re-invested in the airline. They'll go straight back to Bain, adding to the circa $1 billion it has already taken in dividends and capital returns and the undisclosed sum (which had to be north of $500 million) in last year's sell-down to Qatar. That's at least $2.2 billion back from its original $730 million cheque and, as mentioned, Bain still owns 40 per cent of the company.

cf post above.

And on capex, from the AFR, various:

Virgin has also told investors it has capital expenditure plans of $1.1 billion in the next financial year. After some savings, net capital expenditure – maintaining its existing fleet and buying new aircraft and engines – will rise to $900 million in that time from $511 million this year.

It has also flagged a $1.1 billion gross capex, but reassured investors it can be funded out of Virgin’s operating cash flows and a modest increase in its $1.3 billion debt load.

 

[cove]

Ok did anyone get stock allocated in this float.
We got 6% and I heard many got zero.

 

[RooFlyer]

Ok did anyone get stock allocated in this float.
We got 6% and I heard many got zero.

I think that was more than you were expecting wasn’t it?

Are you planning to get some more when they open, or just sit back and see how they go?

 

[moa999]

Will be interesting to see how much the Air India incident mutes the float. A reminder of how quickly things can go wrong in aviation.

 

[RooFlyer]

Will be interesting to see how much the Air India incident mutes the float. A reminder of how quickly things can go wrong in aviation.

The IPO I was involved in has its initial sale period during September 2008.

The collapse of Lehman Brothers on 15 September came in the middle of it. We weren’t underwritten and were a speculative float, but we got there.

Teeth were gritted.

Given that all the shares have been allocated to and bought by brokers, we are talking about the aftermarket for Virgin and I think it will still be okay.

 

[cove]

Well @RooFlyer we can be patient with VGN shares.
We tend to buy shares when they are “cheap” so we can wait.

 

[moa999]

We weren’t underwritten and were a speculative float, but we got there.

Few Aussie floats truly are.. the underwriting is generally only signed once the commitments/book are there/covered.

Slightly different in sell-down where banks can end up on the hook, has has happened a few times recently.