Thursday, June 15, 2017

Textbook Lesson on How to Exit an Airline Stock: Veteran investor sells out of Wizz Air three weeks after it issues surprisingly bullish guidance



The Wall Street Journal
By Stephen Wilmot
June 15, 2017 8:03 a.m. ET


When is the best time for an executive to sell stock? How about three weeks after the company issues surprisingly bullish guidance that sends the shares to a record high.

Veteran airline investor Bill Franke is executive chairman of Wizz Air, a low-cost carrier focused on previously neglected Eastern European routes such as Gdansk to Grenoble and Katowice to Kiev. The 80-year-old Texan was also, until Thursday, its anchor shareholder, with a 19% stake through private-equity vehicle Indigo.

On Thursday, Indigo sold all its ordinary stock to institutions for £249 million ($317.7 million) or £23.20 a share—only a slight discount to Wednesday’s closing price, which was a record. He retains convertible stock and notes that, if converted, would give him a 54% economic interest.

Indigo initially outlined plans to float Wizz in 2014, but was forced to scrap them due to “market volatility in the airline sector.” It finally got the initial public offering off the ground in 2015. Then terrorist attacks and other problems hit European airline demand just as cheap oil fueled a renewed push for scale. Wizz Air’s share price struggled to make headway last year.

Sentiment has recovered this year. But Wizz stock only regained its 2015 highs three weeks ago, after the company wowed the Street with bullish guidance in annual results. The shares finished the day up 13%. “Particularly surprising,” noted brokerage HSBC, was Wizz’s expectation of growth in unit revenues—essentially airfares. Its key peer, Ryanair, expects a 5% to 7% decline in fares over the same fiscal year through March 2018.

Don’t be surprised if Wizz’s future guidance features a new note of caution.

Original article can be found here:  https://www.wsj.com

No comments: