Tags: IPO | Colombia | Airline | Avianca

IPO from Colombian Airline Avianca Sinks in Debut

Wednesday, 06 Nov 2013 05:54 PM

Stock of Avianca Holdings SA plunged on its first day of trading in New York after the Colombian airline sold $408.5 million of shares below its target range as part of a plan to raise funds to buy planes and expand routes.

Avianca’s American depositary receipts, each representing eight of the company’s shares, fell 6.7 percent to $14 at the close in New York. The Colombian-traded shares fell 13 percent to 3,440 pesos, the biggest drop since the company held an initial public offering in Bogota in May 2011.

Chairman German Efromovich, who controls the company along with his brother Jose through their closely held Synergy Aerospace Corp., had said he sought to sell shares in New York partly because he thought the Bogota shares were undervalued. In filings prior to the New York offering, the Bogota-based airline had projected a price range for the ADRs of $17 to $20.

Chief Executive Officer Fabio Villegas said Avianca accepted a lower-than-projected price partly to attract institutional investors including pension funds.

“We wanted a good composition of investors in the sale, and we could have raised the price a bit more but had less of a presence of big funds,” Villegas said in a telephone interview from New York. “If we keep delivering results like we’ve been getting, and we’re in a much deeper market like New York is, then very surely the stock price will start reflecting that value we’re generating.”

Investors Discouraged

Avianca sold a total 27.2349 million ADRs, with 14.7 million sold by existing shareholders, according to data compiled by Bloomberg.

“Investors are taking it negatively for pricing below the range,” Maria Adelaida Velasquez, a Medellin-based analyst at brokerage Serfinco, said in a telephone interview. “Whether or not the sale is actually good for the company, the market was thinking it could be toward the higher end of the range, and so the final price leaves them discouraged.”

Villegas said that Avianca will spend about $4 billion through 2019 as it buys 98 planes including Boeing Co. 787 Dreamliners to meet rising passenger traffic in Latin America. Avianca has been adding destinations including a new flight between El Salvador and Chicago, Villegas said.

Efromovich had said in a Sept. 10 interview that the Bogota shares should be trading at 6,000 pesos to 7,000 pesos. At the time, they changed hands at 3,870 pesos.

“It’s at a totally unjust price if you have a company that meets all its goals, that distributes generous dividends in a complicated sector where it’s one of the few profitable airlines in the world,” Efromovich said in the interview.

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Stock of Avianca Holdings SA plunged on its first day of trading in New York after the Colombian airline sold $408.5 million of shares below its target range as part of a plan to raise funds to buy planes and expand routes.
IPO,Colombia,Airline,Avianca
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2013-54-06
Wednesday, 06 Nov 2013 05:54 PM
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