MY OWN THOUGHTS ON THE DEALThe trading this morning is certainly fascinating. Sucks to be anyone who bought on the open!
Here are my thoughts on the deal.
1) The Government shares at $23.00 is a great deal for the Government, but lousy for AC and shareholders. If anything, it casts AC as a little desperate for the deal. The warrants, while priced higher only add additional pain in the bigger picture. Perhaps it was all just the "price of getting a deal done", but it was a heavy price to pay, and shows the government as much more the puppetmaster in this deal. To be fair to AC, the pandemic has been Hell on earth, and there are signs that the variants could cause additional pain going forward. The Devil you don't know is always a scary thing. All of this of course dillutes the stock as well, which is not in investor's favour...on top of losing ownership. Above all, #1 here sucks for AC,
2) Money loaned to pay back customers from lost bookings? No plus here for AC, other than more debt, albeit at a decent interest rate.
3) Buying more planes? Ultimately good, but not needed right now. This looks more like a side deal to satisfy Quebec.
4). They have to open all routes again? Again, this is way too early. Being forced to fly empty planes around is no good deal for anyone. In time this will hopefully come. But that time is not now and it's just a wicked cash burn on top of a loan.
5) No more job cuts? Moot. I really couldn't imagine more at this point, and if there were, then we're all fk'd because the recovery didnt' happen due to ongoing or worsening pandemic.
6) Cash flow? Sure, I guess that is good. But a part of me thinks they could have gone to the market as needed, and NOT had the government now calling all of the shots. AC was also already very comfortable with a LOT of money in the bank. Why not put that to good use versus giving the Governement that much control over that many things.
As you can see, on the whole I think this is great negotiating for the government, and noteable weakness by AC execs. I was lucky yesterday, and exited AC for totally different reasons. I may be back, but first I'll need to see better clarity on this deal as to why it might somehow be ok, and now also greater clarity on the variants issue.
My sincere best wishes to all those continuing to hold long.