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Qantas Float a Success
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Qantas Float Gets Off To A Good Start
After months and indeed years of delays, postponements and cancelled takeoff clearances, the Qantassharemarket juggernaut has finally lumbered down the runway, attained flying speed and clawed its way into the private sector firmament. The float of the remaining 75% of Qantas took place at 12.30 pm on Monday, July 31 1995, and appeared to get off to a good start. Shares opened at $2.32, jumped around for the first hour or so, and then settled down to trade around $2.20 for most of the remainder of the day, although the price tapered off to a close of $2.15 in the last few minutes. At the closing price of $2.15, this put the market capitalisation of Qantas (i.e. the total worth of the company’s shares) at $2.15 billion. Dividing this by the prospectus’ 1996 profit forecast of $237 million, this gave Qantas a price/earnings ratio of nine, which made it a good deal cheaper (or better value?) than two of its major regional competitors – Singapore Airlines and Cathay Pacific, both of which have price earnings ratios closer to 10.
The biggest winners on the day were the small investors – the “mums and dads”, who already started in the winning position of gaining a purchase price of $1.90 – ten cents below the price paid by institutions buying into the float. Those that sold at $2.20 on the first day made a quick gross profit of just over 15% – not bad for a day’s speculation. In hindsight, it looked as though they had made a very clever move. Indeed, it is thought that the majority of the 76 million shares traded on the first day were sold by up to a quarter of the total of 90,000 small investors going for the quick “stag” profit, and purchased by overseas institutions jumping in quickly to pick up the rest of the shares they wanted, but hadn’t been able to obtain in the initial allocation when there wasn’t enough stock to go around.
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