Virgin Australia returns to sharemarket with a | Australian Markets

Virgin Australia has returned to the sharemarket after a five-year hiatus with a huge $685m initial public offering on Wednesday, and it might affect the longer term health of the Australian financial system.

In the most important IPO of the yr, the Bain Capital-owned airline has determined to return to the ASX amid a rise in home tourism and spending.

The offer will nearly halve Bain’s stake within the airline from about 70 per cent to 39.4 per cent.

Qatar Airlines, which not too long ago invested in Virgin, will reportedly keep its 23 per cent holding.

If profitable, Virgin’s itemizing within the market will probably be seen as a signal of a shiny future for the Australian financial system, as buyers signpost the potential for the nation’s client spending to get well.

If it fails, it might level to the alternative.

So far, all indicators level to a profitable IPO, as home journey demand recovers and the 2 latest RBA charge cuts ease the stress on Australian households.

Qantas has been trading at a report high, and the ASX itself has been overwhelmingly up regardless of swings.

5.1 million passengers have been on home business flights in Australia as of March, a determine sightly beneath the identical time final yr however more than 4 occasions the numbers in mid-2021.

Despite Virgin’s voluntary administration in 2020 following Covid-19 journey restrictions, after which it was acquired by US non-public equity company Bain, it now corners 34.4 per cent of the home market share as of March 2025.

It shouldn’t be lagging a lot behind Qantas, which holds 37.5 per cent, in accordance to the Australian Competition and Consumer Commission.

The death of different finances airways similar to Bonza and Rex has solely boosted these two main gamers.

Virgin can also be planning to resume long-haul worldwide flights made attainable by its partnership with Qatar.

The airline is conducting its IPO utilizing a front-end book-building technique, the place investor bids are submitted earlier than the prospectus receives approval from Australian regulators.

According to the time period sheet, institutional buyers have been in a position to their bids up to Thursday, with the stock anticipated to start trading on June 24.

Virgin’s IPO would be the largest in Australia following the DigiCo Infrastructure REIT launch that raised $2bn in December earlier than a 30 per cent downturn in share price.

Experts say the Virgin IPO might offer buyers a distinctive entrance into the Australian airline market, nevertheless it has its own dangers.

“Virgin Australia’s planned return to the ASX via a $A685m initial public offering is the first major IPO of 2025, and one to watch closely,” eToro market analyst Josh Gilbert mentioned.

“The IPO, priced at $A2.90 per share, gives the airline a market cap of $A2.bn. It follows the on-and-off IPO over the last two years when the airline sector has moved from strength to strength, with companies around the world announcing record profits and seeing shares rally.

“Under Bain’s direction, Virgin Australia has streamlined operations, focusing on profitable domestic routes, and achieved record underlying earnings of $A439m in the latest half year.

“Essentially, it’s a very different airline than it was in 2020 and it is far more attractive to investors. Having only one real competitor in the landscape, Qantas, makes the offer uniquely appealing.”

However, the investment may be a main risk.

“Investors may view Virgin’s IPO as an opportunity to gain exposure to Australia’s duopoly airline market at a compelling valuation that will trade at a discount to Qantas,” Mr Gilbert mentioned.

“Although the airline sector has had a great few years, investors should be mindful of its razor-thin margins and cyclical risks, particularly if demand slows amid slowing consumer spending.”