Why Qantas shareholders should consider following Alan Joyce’s lead and sell their shares

Should Qantas shareholders take a hint from CEO Alan Joyce’s share sell-off and offload their own shares? Analysts give their views.

There are mixed views as to whether Qantas shareholders should follow the lead of CEO Alan Joyce and sell their shares, after he made $17m by offloading 90 per cent of his stake.

At the time of the sale, Qantas shares were worth $6.75, but since then the price has tumbled to $6.19, the lowest since late ­February.

The sudden sale of 2.5 million shares was believed to be prompted by Mr Joyce’s purchase of a second apartment in the same block as his existing home at The Rocks, for about $9m.

He and husband Shane Lloyd are also selling their Mosman mansion, which they bought a year ago for $19m.

Mr Joyce was left with 228,924 Qantas shares and a further 262,000 in trust but that will soon be bumped up considerably when more than five million share rights awarded to him in recent years vest.

Morningstar equity analyst Angus Hewitt said Qantas shares remained a “bit expensive”, with his value estimate closer to $5.90 a share.

He said conditions were currently very good for airlines but headwinds were coming.

“Qantas is probably going to report a record profit (of close to $2.5bn) but we don’t think these exceptional conditions are going to persist,” Mr Hewitt said.

“There’s capacity bottlenecks and labour shortages at the moment and when we get through that, pricing competition is going to come back. Domestic pricing is already heating up and international competitors all have their own capacity recovery plan.”

Mr Joyce will exit Qantas in November after 15 years at the helm of the airline, with chief financial officer Vanessa Hudson named as his successor.

Qantas chief Alan Joyce at the site of Western Sydney International Airport on Thursday. Picture: Simon Bullard

Motley Fool financial analyst James Mickleboro said he believed Qantas shares were a “top buy” even in light of the week’s events.

“Due to a combination of structural changes and the expectation that international travel demand will outstrip supply for the remainder of the decade, Qantas appears well positioned to maintain its bumper profits for the foreseeable future,” Mr Mickleboro said.

“Despite this, Qantas is valued only marginally above pre-Covid levels. So there’s a lot to like with Qantas shares right now and I would not be a seller.”

He said it was not unusual to see a company chief executive sell shares periodically but he was surprised by the number that Mr Joyce sold. “It isn’t often you see a CEO sell down the majority of their stake in one go,” Mr Mickleboro said.

“I was also surprised that Mr Joyce didn’t wait until his exit from Qantas in November. At that point he would no longer be required to report his share sales to the ASX.”

Forager Funds chief investment officer Steve Johnson shared the view that Qantas’s cost structure would make the company more profitable in the future.

However, he said the current share price was about right and it was prudent of Mr Joyce to sell a large portion of his shares.

“They probably represent a very significant amount of his wealth,” Mr Johnson said.

“If it was a small business he’d founded and he was still sitting on the board, it would be a different matter but he’s a professional-for-hire CEO who’s accrued a lot of wealth in his time and he’s taken some of that money off the table.”

Australian Shareholders Association chief executive Rachel Waterhouse said any decision to sell shares should take into account where the shares fit into investors’ portfolio, why they have them and price expectations.

She said in the case of Mr Joyce, the shares he sold vested a long time ago, and he had almost twice that many rights unvested.

And even though he was selling his Mosman property, there was no way of knowing if the sale would occur in time to cover the cost of the new apartment.

“Would it have been risky to wait until he steps down if the funds are required now? Yes, just on the basis of market risk,” Ms Waterhouse said. “Ditto on the property sale. We all know negotiating positions are stronger if a seller can wait for the price they think is appropriate – a quick sale may come with a discount.”

Originally published as Why Qantas shareholders should consider following Alan Joyce’s lead and sell their shares