After Guzman y Gomez so successfully employed a strategy to feed investors an hors d’oeuvre (or just a couple of tortilla chips) of shares in its float to keep them hungry for more, the market has turned its attention to Virgin and its perpetually upcoming debut on the stock market.
But dealing with the complexities of floating an airline makes selling shares in a burrito maker look like a walk in the park.
Now the latest talk that Qatar Airways is eager to become a cornerstone shareholder in Virgin brings another complicated twist. But more on that later.
For Virgin, finding the right time to float isn’t easy, and nor is finding the right shareholders.
Guzman y Gomez’s stunning 36 per cent share price leap on debut would have provided Virgin’s US owners Bain with a shot of adrenalin. GYG was something of a litmus test for the initial public offering (IPO) market, and demonstrated clearly that investors are thirsty for new floats.
However, while GYG was marketed as a $2.2 billion float, only $335 million of shares were sold into the IPO and the existing shareholders retained the rest. The constrained supply teamed with decent demand, explaining the blockbuster price.
Bain bought Virgin out of administration in 2020, injected some of its secret sauce, (a cost-cutting, fleet-consolidating, route-refining and balance sheet-enhancing exercise) and has been waiting for the opportunity to cash in some of its chips.
It’s been on the cusp of a float for more than a year now, which makes sense since its earnings were boosted by the post-COVID travel boom.
Arguably, it should have hit the IPO go button late last year, but decided the markets were still a bit skittish.
Since then, the stock market has improved but Virgin has become more complicated. To begin with, the chief executive that was spearheading the IPO marketing drive, Jayne Hrdlicka, has announced her departure. So, the airline doesn’t have a CEO, who is effectively the chief salesperson for an IPO.