Aeroméxico is close to concluding a financial restructuring that has taken more than a year and a half, and that implies a series of changes that concern its investors, even those who have a single share of the airline. The main one is that the company’s titles –which on Friday closed at a price of 1.47 pesos per share– are about to be traded at 1 peso cent, and later to be worth practically nothing.
For the airline, there will be a before and after after its restructuring under Chapter 11 of the US Bankruptcy Code. As part of the most recent agreements between the company’s shareholders, a capital increase of 4,266 million dollars (mdd) was approved, which implies the issuance of more than 682 billion new shares, and later a conversion that will significantly dilute the value of current airline securities.
However, investors still have an escape window: a Public Offer for the Acquisition of Shares (OPA) in which the shares will be bought at a fixed price, low, but higher than zero.
Should I buy Aeroméxico shares right now? Sell them? Wait for the takeover bid? What will happen if I do not sell my shares? Below we answer these questions.
What will happen to my Aeroméxico shares?
Currently, there are more than 682 million shares in circulation, which anyone can buy, and which are also known as free float or free float.
Due to the entry of new capital to Aeroméxico, there will be an issue of 682 billion shares, which will mean that each share will have a significantly lower value, even close to zero, as the airline itself acknowledges.
“After the corresponding capital increase, the current shareholders will be almost completely diluted, so that their remaining shareholding will probably be minimal (if any),” the airline said in a statement sent to the Mexican Stock Exchange (BMV). in February 2021.
Hence, the shareholders of Aeroméxico agreed to carry out a takeover bid so that investors can sell the shares they have at a value of 0.01 pesos (or 1 peso cent) which, despite being low, is not zero.
“The OPA is an exit mechanism for current investors who have Aeroméxico shares so that they can monetize their current position, that is, sell it, and not suffer a complete dilution of their investment, which is practically zero,” explains Marco. Montañez, analyst at Casa de Bolsa.
The takeover bid, which will be carried out by the firm Alinfra on a date yet to be defined, will give way to the entry of new capital, which will entail a process known as a reverse split , in which one new share will be issued for every five million shares. Therefore, if this amount of shares is not gathered, investors will probably be left without any title, according to Brian Rodríguez, an analyst at Monex Grupo Financiero.
“Currently, there are 682 million shares in circulation. If we make the conversion on 5 million [new shares], we will only have 136.42 shares left with respect to the current share capital, which only represents 90,419.9 pesos,” he warns. These shares would represent 0.0001% of the new capital stock of Aeroméxico.
What alternatives do I have?
Specialists warn that the best alternative for investors is to sell their shares before the OPA, since they will obtain a better price.
“The current Aeroméxico shareholder who maintains the position in the station, if he does not participate in this takeover bid and stays throughout the restructuring process, will divide each share he has among several new shares, which will leave an amount very close to zero. ”, warns Montanez.
“The recommendation that we are giving our clients is to get out today at market prices. We see as the best alternative to rescue part of the investment that has been made in the airline and, ultimately, it would be to participate in the takeover bid, although it is clearly set at a price of 1 peso cent, which is a symbolic price in function of the strong dilution that is anticipated due to this situation”, he adds.
This was agreed by the Monex Grupo Financiero specialist, who sees in the reverse split process practically an exit for all non-institutional investors.
“Speaking of the investor, currently what we are recommending to our clients is to leave the issuer. Today it closed at 1.59 [price of Wednesday, January 19, 2021], but at the opening it even reached levels close to 2 pesos per share. We are recommending getting out of paper while you can from here to the takeover bid,” says Rodríguez.
For Aeroméxico, what follows is a hearing before the Court of the Southern District of New York, scheduled for Thursday the 27th, to confirm its restructuring plan, which was approved in recent days by 88% of its creditors.
