Hi all, I'm a real newbie and would highly appreciate if anyone can explain to me in plain simple English what it means that Lufthansa is increasing Capital. Overnight I saw my Lufthansa share drop 27% !!!!! Is this the time to by more or sell out?? I have received following message, but to me it is "mumble-jumble". I can see they offer me a choice but I can't really make out if it a good or bad option. Any thoughts anyone? MESSAGE RECEIVED:
Lufthansa ran out of money .... Since the beginning of the Covid-19 pandemic, Lufthansa Group has taken decisive action to strengthen its liquidity and restore its balance sheet. Today, the Group is launching a EUR 2.1 billion capital increase to establish a sustainable and efficient capital structure and to enable the Group to repay the Economic Stabilization Fund of the Federal Republic of Germany (ESF)). The transaction is fully underwritten by a syndicate of 14 banks. In addition, a number of funds and accounts under the management of BlackRock, Inc. have entered into a sub-underwriting agreement for a total of EUR 300 million and have committed to fully exercise their subscription rights. The capital increase is meant to strengthen the Group’s equity position. The Company will use the net proceeds to repay the Silent Participation I of the Economic Stabilization Fund of the Federal Republic of Germany (ESF) in the amount of EUR 1.5 billion. Additionally, the Company intends to fully repay the Silent Participation II in the amount of EUR 1 billion by the end of 2021 and also intends to cancel the undrawn amounts of the Silent Participation I by the end of 2021. Upon termination of the Silent Participations, Lufthansa Group will initiate the process to cancel the remaining Authorized Capital C.
Hi Marvan, thanks a lot for the explanation. It all that looks like good news, so why did the share fall? I have also read about speculations that the Government may sell their shares in the company. Will that make Lufthansa more unstable? Finally, in the letter above they referee to an option. Do you have more details on that (basically, is it a good deal or not)? Have a great day
The subscription ratio is 1: 1 and the subscription price is EUR 3.58 per new share as far as i know. In view of a share price above 8 euros, the price had to go down. Note, i am no shareholder ,see below for more info: The airline group will offer new shares at 3.58 euros apiece, less than half Friday’s closing price of 8.21 euros, and aims to return all of its 9 billion euros in state borrowings by the end of the year, according to a statement Sunday. The shares rose despite the lowly issue price, which has long been expected by the market. Oil prices declined for a second session, lifting the broader airline industry, while full repayment will free Lufthansa from restrictive conditions attached to the bailout and allow it to avoid punitive interest payments. Lufthansa won’t complete the sale until Oct. 5, missing Chief Executive Officer Carsten Spohr’s original target of repaying the state before a federal election next Sunday. He said earlier this month the carrier will instead seek to secure a deal with Chancellor Angela Merkel’s government before she leaves office, which may be some time after the vote due to negotiations over the make up of a ruling coalition. https://finance.yahoo.com/news/lufthansa-raise-2-14-billion-170413598.html
Thanks, for your input. I still don't follow why the share went down. To get access to the new shares at EUR 3.58 a piece, you need to already own share. I.e. if "you" sell "your" shares now then "you" will lose the opportunity to get the cheaper ones. Therefore, I would expect people to stick to there share (I'm I missing something obvious here??) Do you know what will happen to the share price for the new shares? Hence, If the new shares are purchased at EUR 3.58, but the market value at the time of trading is eg. EUR 6.25. Will the purchased share then instantly be valued at the market price (3.58 -> 6,25)?
This action is not the end of the story, Lufthansa must repay more billions towards de German State and as long as not everything is payed back, they may not pay dividends, not pay bonuses and make acquisitions ..... At the end of the year, Lufthansa will probably do the same action to collect an other billon euro's. Below an article exlaining this, only available in Dutch, sorry. Lufthansa verrast beleggers met versneld terugbetalen staatssteun | De Tijd
DLAKY? One thing I heard Warren Buffet say, is to avoid investing in Airlines. I have flirted with LUV- Southwest Airlines but still mostly avoid the Airlines. Autonomous, Electric/Alternative Energy, eVTOL's are the way of the future IMO, this includes moving freight as well. Been looking at JOBY and ACHR (Archer Aviation) .... EH (EHang, China) and EADSY (AirBus) are also on my radar with AirBus being my favorite.
What a bad way to wake up to, just saw that Lufthansa is trying to raise $2.5 Billion to repay state bailout funds. Any updates how much they've raised currently? That's also why it's important to have your portfolio diversified. I'm a big fan of crypto so I'm into stocks like $BTCS that involves crypto and one of the hot topics now which is PoS.
