I wrote exactly two years ago a highly critical article "AirAsia X: IPO poses many questions", some snippets:
- AirAsia X is offering 790 million shares, rumoured to be priced around RM 1 per share. Almost 200 million of these shares are from existing shareholders, which seems strange, AirAsia X's balance sheet is weak and this company needs money, lots of it, so why not just issue new shares?
- I have blogged before about the huge amount of Related Party Transactions (RPTs) between AirAsia and AirAsia X...... From a CG point of view, this is (highly) undesirable.
- This huge amount of deferred tax assets was just enough to claim retained earnings of 35m. Still a very low amount, given the fact that 480m has been invested in the company over a six year period. Quite amazing that a company with such a poor track record would be allowed to be listed on Bursa Malaysia.
- A company in this state, urgently needing money should not strive for a sky-high valuation. The total number of shares currently is close to 1.8 Billion, in other word pre-IPO the company is valued at about RM 1.8 Billion. Shareholders equity is 518m, which includes 247m deferred tax assets. The offer therefore looks very stretched, both from an earnings point of view (operational losses, even after six years) and a balance sheet point of view (excl. deferred tax assets).
There were warning signals, for instance:
- It must also be noted that Virgin Group (Richard Branson) invested in AirAsia X in 2007, but did not participate in the subsequent rights issue in 2010, according to The Edge. Also, he sold his 10% of the company alledegledly for more than USD 21M, valuing the whole company at more than RM 650m.
- AirAsia had an option to increase its current shareholding in AirAsia X, but strangely enough it decided not to execute that option. Its shareholding of AirAsia X will therefore drop to only 12%, hardly meaningful and below the 20% needed to call AirAsia X its associate.
- Not only did the insiders sell shares at the IPO, they sold even more shares after the IPO.
The graph of the share price looks rather ugly:
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