Virgin Australia Financially Secure? [Now in Voluntary Administration]

[dajop]

Sorry, I am not a smart investor / savvy capitalist But I do think that a company's share price has some indication of their well being. At the now 8c a share, VA is a complete basket case.

Interestingly, in the last two weeks or so, their share price has dropped about 40%. Do you know how much QF’s share price has dropped in the same period? About the same. (Of course VA’s dropped substantially prior to the last two weeks, whereas QF’s didn’t).

 

[juddles]

Interestingly, in the last two weeks or so, their share price has dropped about 40%. Do you know how much QF’s share price has dropped in the same period? About the same. (Of course VA’s dropped substantially prior to the last two weeks, whereas QF’s didn’t).

I think that QF have dropped about 15%, so very different. But it all leads to the same conclusion...

 

[dajop]

I think that QF have dropped about 15%, so very different. But it all leads to the same conclusion...

Compared to close on 20 Feb, they’ve dropped 38%. Today they closed 11% lower.

 

[pauly7]

Sorry, I am not a smart investor / savvy capitalist But I do think that a company's share price has some indication of their well being. At the now 8c a share, VA is a complete basket case. In Corona terms, they are a ninety year old with chronic respiratory disease, living in Wuhan, who has tested positive....

Probably a little alarmist but hey this is social media I guess why not.... sigh.

 

[juddles]

Probably a little alarmist but hey this is social media I guess why not.... sigh.

Pauly. recognizing (and truly respecting) your role as someone who quells mayhem, rather than fostering it, I retreat on this. I was just using the share price - which is a metric that is very available. Maybe Virgin are not a basket case.

 

[pauly7]

Pauly. recognizing (and truly respecting) your role as someone who quells mayhem, rather than fostering it, I retreat on this. I was just using the share price - which is a metric that is very available. Maybe Virgin are not a basket case.

They aren’t, read the last 10 pages of civil
discussion and you will get a good picture of why. It’s been probably the most robust, on topic, respectful and factual thread on this forum for a very very long time.

Sure they are loose operation and need a good wallop of common sense and some decent clear strategic heads at the top, but if they can get through the corona impact (like everyone else) they will be just fine.

 

[juddles]

Compared to close on 20 Feb, they’ve dropped 38%. Today they closed 11% lower.

Instead of contesting things with sheer comments, please take the time to post actual figures. QF and VA at various dates.....

Post automatically merged: Mar 9, 2020

They aren’t, read the last 10 pages of civil
discussion and you will get a good picture of why. It’s been probably the most robust, on topic, respectful and factual thread on this forum for a very very long time.

Sure they are loose operation and need a good wallop of common sense and some decent clear strategic heads at the top, but if they can get through the corona impact (like everyone else) they will be just fine.

Honest question: if so, why the share price? Why do the professionals not see that health?

 

[ja1]

Sorry, I am not a smart investor / savvy capitalist But I do think that a company's share price has some indication of their well being. At the now 8c a share, VA is a complete basket case.

That's probably why share price alone is rarely an indicator of the value of a business (but you're right, it sure doesn't look good).

At one point HD's share capitalization made it compareable to General Motors despite GM being a much much larger company by revenue..

The volume of trade on VA's (rather thin float, since 90% is owned by ETH, VG, HNA, SQ etc) shares is amazing.

The investor report on the downgrading of their outlook was interesting for a variety of reasons. For example (and this is just a few days ago) - one of the assumptions is that Brent Crude for 2021 is at $55 and at the moment it's already 10% below that figure and the trend is dropping.

The key public points seem to be - can VA execute on what it needs to do (manage costs), bring its debt cover back under 6.0x and keep its liquidity (i.e the fine balancing act between its bank accounts, its banks and its shareholders)

 

[pauly7]

Honest question: if so, why the share price? Why do the professionals not see that health?

Sorry - again read back through the thread it’s been covered there are a number of reasons including their financial structure, their ownership structure, performance, poor strategic decisions, investor relations strategy (awful) etc etc

Don’t get me wrong I think VA have a struggle ahead of them but I’m not worried about their extinction Despite all their issues they still have a strong core domestic business that PS saved when he banished the 738Max order.

 

[juddles]

That's probably why share price alone is rarely an indicator of the value of a business (but you're right, it sure doesn't look good).

At one point HD's share capitalization made it compareable to General Motors despite GM being a much much larger company by revenue..

The volume of trade on VA's (rather thin float, since 90% is owned by ETH, VG, HNA, SQ etc) shares is amazing.

The investor report on the downgrading of their outlook was interesting for a variety of reasons. For example (and this is just a few days ago) - one of the assumptions is that Brent Crude for 2021 is at $55 and at the moment it's already 10% below that figure and the trend is dropping.

The key public points seem to be - can VA execute on what it needs to do (manage costs), bring its debt cover back under 6.0x and keep its liquidity (i.e the fine balancing act between its bank accounts, its banks and its shareholders)

Clearly the consensus amongst professionals who weigh all these things is that VA is a basket case...

 

[ja1]

Did anyone notice that PS just bought a million additional shares today ? (well, over the last week anyway, with the filing today). At an average of 10.5c. Could have saved $20K if he'd waited

 

[ja1]

Clearly the consensus amongst professionals who weigh all these things is that VA is a basket case...

A basket case for what exactly ? For mum and dad unsophisticated investors ? Almost certainly.

For its strategic investors/partners in the airline industry ? Definitely not a basket case but those decisions are drive by high conviction individuals or boards and finances are only one of the things they're buying for..

For being an airline that works pretty well ? Yeah definitely not a basket case. I'm still booking things with them and looking for ways to keep status..

 

[pauly7]

Did anyone notice that PS just bought a million additional shares today ? (well, over the last week anyway, with the filing today). At an average of 10.5c. Could have saved $20K if he'd waited

I would heavily suspect this is a part of their new investor relations strategy that they had to quickly roll out last week - they did back to back briefings with investors, financiers, financial press etc

 

[dajop]

Instead of contesting things with sheer comments, please take the time to post actual figures. QF and VA at various dates.....

I'd suggest if you are commenting on share prices, It is not difficult to type "QAN share price history" into Google or "VAH share price history" and it will bring up a nice graph of the history, to make comments on. But for reference:

20 Feb QF $6.67, VA $0.13 (but this was at QF's most recent high point, but most definitely not VA high point)
COB today QF $4.15 VA $0.08

FWIW over same period NZ has declined from $2.63 to $1.88 (29%). Basically what I'm saying is the last 2-3 weeks have all been about the decline in the sector outlook.

 

[juddles]

A basket case for what exactly ? For mum and dad unsophisticated investors ? Almost certainly.

For its strategic investors/partners in the airline industry ? Definitely not a basket case but those decisions are drive by high conviction individuals or boards and finances are only one of the things they're buying for..

For being an airline that works pretty well ? Yeah definitely not a basket case. I'm still booking things with them and looking for ways to keep status..

then why the share price collapse?

 

[juddles]

I'd suggest if you are commenting on share prices, It is not difficult to type "QAN share price history" into Google or "VAH share price history" and it will bring up a nice graph of the history, to make comments on. But for reference:

20 Feb QF $6.67, VA $0.13 (but this was at QF's most recent high point, but most definitely not VA high point)
COB today QF $4.15 VA $0.08

FWIW over same period NZ has declined from $2.63 to $1.88 (29%). Basically what I'm saying is the last 2-3 weeks have all been about the decline in the sector outlook.

If you did that exact same thing from a longer period I would respect it. But i think many just want to forget when they paid $2 a for a Virgin share....

 

[Must...Fly!]

Sorry, I am not a smart investor / savvy capitalist But I do think that a company's share price has some indication of their well being. At the now 8c a share, VA is a complete basket case. In Corona terms, they are a ninety year old with chronic respiratory disease, living in Wuhan, who has tested positive....

Except that because the free float is 8% or less, this is like making that diagnosis by inspecting the patients foot.

 

[ja1]

then why the share price collapse?

What Dajop said - look at the general market for a start.

Then look how the share market works - it isn't all buy and hold and investment grade. VAH volume was 8 billion shares traded today (?!) and this is out of the 10% free float that exists. So a lot of volatility which has almost no effect on the actual enterprise value of the organization where 90% of the register is partners/investors (and I don't mean market ones).

It's market cap is ~$735m today. None of those holders are selling whether the market cap is $500m or $1b. A bunch of them might think about it if it's $5b but that's some ways off. So the share price isn't a good indicator to use by itself on the financials of the company or to make predictions about its future.

Don't get me wrong.. it isn't that it's looking wonderful and if all you had was the share price graph to watch, why would you invest.. But if all you have is the price to look at then you blow you money anyway - think about all the drug discovery companies or mining exploration companies that have a huge run up in share price and then everything just collapses. The point where the price was 10x or 100x what it started out as is not a great indicator the business is great. It's just an indicator of what the market thinks at a particular point in time.

 

[Harthagan]

Sorry if this is way off but my understanding is that due to their ownership structure and the fact they still have roughly a billion dollars cash on hand there is very little (if any) chance of virgin going into involuntary administration in the short term, i.e. next few months. If this assumption is wrong can someone please correct me on it and possibly explain why.

If that assumption is right then my next question would be regarding them going into voluntary administration. At what point does that become a feasible option on the table, could it already be on the cards? how quickly would it happen and who makes the final decision if it does get to that point?

 

[juddles]

Except that because the free float is 8% or less, this is like making that diagnosis by inspecting the patients foot.

You clearly understand these things more than I, so I will withdraw from comment. And I do so taking the hit of not investing in VA...