Qantas blames bad timing as investors snub share purchase plan
Unfortunate timing has contributed to a Qantas share offer attracting little interest from shareholders and raising just 14 per cent of the $500m target.
Unfortunate timing has contributed to a Qantas share offer attracting little interest from shareholders and raising just 14 per cent of the $500m target.
The share purchase plan (SPP) launched on June 25 raised $71.7m after only 5 per cent of the 173,343 shareholders able to participate applied.
In a statement to the ASX, Qantas pointed out that the SPP coincided with a series of tightened border restrictions across the states and territories sparked by the COVID-19 outbreak in Victoria and small clusters elsewhere.
“While the Qantas Group’s recovery plan anticipates some uncertainty associated with the pandemic, the timing of these events and their implication for travel demand had an obvious impact on the Qantas share price and the take up of offer by eligible shareholders,” said the statement.
All valid applications for shares were accepted in full, with Qantas expected to issue 22.5 million new shares to 8660 shareholders. The new shares would be sold at $3.18 each, and were expected to start trading on the ASX tomorrow.
All Qantas directors applied for and received shares under the SPP with the exception of Tony Tyler, who lives in Hong Kong and was ineligible.
Qantas had been hoping to raise $1.9bn from an institutional placement and share purchase plan combined to help the airline accelerate its recovery from the COVID crisis.
As expected, the institutional placement raised $1.36bn but the poor response to the SPP saw the overall amount generated fall short of the target, coming in at $1.43bn.
It is the second airline share offer to perform poorly in recent months, in a clear sign of anxiety surrounding the aviation industry at the current time.
In July, Brisbane-based charter operator Alliance announced its share offer had attracted applications from just 8.4 per cent of eligible shareholders, raising $3.8m of the $30m target.
Qantas CEO Alan Joyce will provide a further update on the airline’s financial position next Thursday, August 20, when he delivers the company’s 2020 full year results.
At the June 25 trading update, Qantas indicated it was expected to break even or make a small profit, thanks to a $648m net gain in the first half.
Since March, Mr Joyce has not taken a salary, and nor did his executive team or directors for three months, in an effort to share the pain with staff.
The vast majority of the group’s 29,000 employees were stood down and Mr Joyce recently announced the airline would reduce its workforce by 6000, and emerge from the COVID crisis as a smaller carrier.
Another 2000 workers were unlikely to be needed until late 2023, when international travel demand was expected to have almost fully recovered from the shock of the pandemic.
About 100 aircraft remain grounded with much of the long-haul fleet sent to California for storage, or in the case of the now retired Boeing 747s, broken up and sold as parts.
Engine manufacturer GE Aviation is understood to have bought the engines of the six 747-400s but a buyer has not been found for the hulls.
Qantas shares closed up 3.3 per cent on Monday at $3.43 following the announcement of the SPP results. The share price sank as low as $2.03 in March, after starting 2020 at more than $7.