Air NZ retains altitude as investor buy into raise
Retail investors appear to be supportive of the airlines recovery plan.
Friday, April 1st 2022, 5:56PM 
2 Comments
by BusinessDesk
New Zealand's benchmark share index followed a generally weak global trend and declined slightly on Friday but will finish both the week and the month virtually unchanged.
The S&P/NZX 50 Index fell 20.8 points, or 0.2%, to 12,089.43, today. Turnover was $111 million.
CMC Market’s analyst Tina Teng said Asia markets were set to open lower this morning as Wall Street continued to lose ground overnight with investors concerned about a broad economic slowdown.
The NZ market fell sharply at the start of the year but has been bouncing back and forth since – down 0.1% in the past month, up 0.2% in the past week – despite some substantial market news.
Dominating the headlines this week has been Air NZ’s mammoth capital raise, which is one of the biggest in local market history.
Shares in the airline fell another 1.9% to $1.26 today, bringing its five-day drop to 9.6%.
While that’s a significant loss, the share price is holding up better than expected and is trading well above the offer price – even once adjusted for dilution.
Greg Smith, head of retail at Devon Funds, said he was surprised the shares hadn’t “lost more altitude” and it seems some investors are happy to back the airline’s recovery.
“The reality is however that the airline still faces substantial challenges ahead, and as Dame Therese Walsh aptly noted, the ride ahead will be a ‘bumpy’ one,” he said.
Many investors will have been buying shares today so they will be eligible to take part in the capital raise at the reduced price. Today was the last opportunity to buy shares and get onto the register before the record date on Monday evening.
Those shares are likely to fall sharply on Monday when they no longer carry the right to buy more shares at 53 cents each.
Ryman Healthcare had the biggest fall on the index today, declining 2.2% to $9.17, followed by Vista Group International which declined 2.15% to $1.82.
On the other side of the board, Tourism Holdings bounced 3.2% to $2.95 as it recovered from negative-sounding statements from regulators regarding its attempted acquisition of Apollo.
Pacific Edge has also been weak but recovered 3.1% to 99 cents today, likely helped by a Forsyth Barr research note this week which said the stock had been oversold and was still worth $1.30.
NZ Refinery changed its name to Channel Infrastructure NZ, and its shares rose 1% to $1.05. The company is converting from an oil refinery to a processed fuel import terminal.
Synlait Milk was up 1.2% at $3.35 after it reported a jump in first-half net profit and hinted at “robust profitability” in the full year.
The NZ dollar retreated from yesterday’s year-to-date high of 69.75 and was trading at 69.24 at 3pm in Wellington.
ANZ strategist, David Croy, said while the US dollar has continued to gain strength, it hasn’t kept pace with the NZ dollar which has performed strongly as commodity prices and short-end interest rates have risen.
| « NZ shares steady despite Air NZ's descent | NZ shares fall as Air NZ goes ex-rights » |
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Comments from our readers
The theoretical ex rights price was 77.5 cents, so this is a big jump on the day.
Expressed the other way round, on a cum rights basis, 1.03 is the equivalent of $1.97.
We are clearly all fools by not buying the cum rights shares on Friday for 1.265, and selling them today for the equivalent of $1.97. That would have been 70.5 cents a share profit, which would have paid a lot of the 53 cents exercise.
Now I have noted that both NZX site and a broker site I have access today says that even at 1.03, this is a 13 cents fall against Fridays price.
There is a lot of low value trading going on, which suggests retail investors. Could the buyers have been mislead by the NZX showing todays AIR is well down on Friday's trading - thius encouraging purchases?
If I'm right, would a buyer who bought today encouraged by the NZX saying the price was down have any cause of action against NZX?
Would FMA as regulator of NZX have any interest?
Of course I could be completely wrong about all of this and will have a bit of egg on my face!
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"Many investors will have been buying shares today so they will be eligible to take part in the capital raise at the reduced price.
Ex issue the share price adjusts so that 3 shares after the ex date are worth what one share was worth Friday plus $1.06.
If buyers this week think they are going to make a profit equal to the difference betwwen the 53 cents per share they're paying for the new shares and the share price next week ex issue, they'll be sadly mistaken. That apparent gain is fully offset by the loss they will incu on the share they bought this week - absent any rerating of AIR's shreprice. And my guess is any rerating will be downward, not upward.
There is no magical moneytree in rights issues!
Basically AIR needed to raise new equity of $1.06 per existing share. They need the deep discount to "trick" the punters into stumping up the money. A 1 for 1 issue at $1.06 would have sunk like a stone. 2 for 1 at 53 cents (which is the same) can be marketed as a bargain.
I would hope the Retirement Commissioner might think it worthwhile doing a chikds guide to rights issues.