Virgin Australia could rejoin the ASX ranks with an initial public offering (IPO) in the near future.
It's been nearly two years and three months since the Qantas Airways Limited (ASX: QAN) competitor was last seen on the ASX boards. During this time, the S&P/ASX 200 Index (ASX: XJO) climbed roughly 15%.
The latest rumours suggest the number of airlines in the public markets could soon tick one higher as the old Flying Kangaroo's rival seeks its second chance with retail investors.
How close could we be to the Virgin IPO?
From yielding to a private equity buyout from Bain Capital during the depths of administration to posting a $125 million half-year profit, Virgin Australia has come a long way.
The mighty resurgence in consumer spending — namely on travel — has been a boon for once-struggling airlines. Pent-up demand post-COVID manifested itself as an insatiable appetite for exploration, both internationally and domestically.
As such, Virgin's financials are believed to have improved substantially, giving Bain Capital something to boast about in IPO talks.
On Friday, the Australian Financial Review reported on where Virgin was situated with finding lead managers for coordinating an ASX return. The investment banks in the running are believed to be:
- Jefferies
- Credit Suisse
- Goldman Sachs
- Morgan Stanley
- UBS
- Bank of America; and
- Barrenjoey
It was said that up to four investment banks could be selected within the next two weeks to assist with the Virgin IPO.
Unfortunately, an exact timeline has not yet been revealed on when Virgin could fly into the ASX again. However, in January, Virgin Australia chief executive Jayne Hrdlicka said an IPO would be conducted "at the earliest opportunity".
Will the Qantas share price keep gliding?
Despite the prospects of Virgin making a splash with its IPO, the Qantas share price has been resilient so far in 2023. Shares in Australia's most prominent airline are up 7.8% since the start of the year.
Remarkably, the Qantas share price is now up 40% over the past six months. Perpetual portfolio manager James Rutledge believes that the Aussie airline might now be nearing 'fair value'. However, Rutledge doesn't foresee Virgin's IPO as materially detrimental to Qantas.
In talking to the AFR, the portfolio manager noted that Virgin will likely focus on profits rather than market share post-IPO.
Meanwhile, the team at Goldman Sachs thinks there could be another 33% upside to the Qantas share price. As my colleague covered last week, Goldman is pencilling in an $8.50 share price based on its improved earnings capacity.
