THE REALITY OF THE NEWSI've read through a few of the posts here, and I'll start by saying that trying to blow sunshine that this is somehow "good news" doesn't help whatsoever. To put it bluntly, this is NOT good news. Consider the following:
1) Way back when, when Air Canada was originally going to purchase Transat at about $18, the news was taken as a positive in that AC would be gaining the routes and planes. There was no real discount here, but clearly AC thought there was positive benefit here otherwise they wouldn't have put the deal in place at all.
2) With the Pandemic, everything changed. The deal was going to be scrapped by AC and Transat was up against the wall. A new deal gets struck at $5.00, which was a stunning price for AC. A complete steal.
3) The next step was shareholder approval. That went through. I'm sure Transat shareholders hated it, but there was no other option.
4) The next bigger hurdle was Canadian Gov approval. I was actually surprised that this went through, as there was other suitors. But again this was a big plus for AC. The sentiment here was that this was a big win for AC, and that EU approval would essentially be a rubber stamp.
So you take all this, and the next step is to consider how much of this "good news" is baked into the stock. To summarize, these are the positives from a share price perspective.
a) Bought another airline at a ridiculously cheap price, gaining their routes and aircraft
b) Would give them somewhat of a monopoly of transatlantic routes.
c) Further enhancing revenue stream.
d) Essentially a done deal...just waiting for the rumbber stamp.
I would consider all of these pretty big positives for AC shareprice enhancement.
Now, with today's news. instantly take all the above positives away, and then add on another -$12Million penalty. Is the market going to be disappointed? Well, the obvious answer I think is "yes". There just isn't any upside to this news. The only question is then, to what degree is this disappointment going to be registered in the share price.
Personally, I wouldn't be surprised to see the share price off 10%-15% on this news. There are so many other factors at play in the market these days (ok, it's nuts) that I could easily argue for a bigger haircut, but also argue for less too. (ok, the market is REALLY nuts.
I currently have no position in AC, but at some point I know I'll be back in.
If the market REALLY whacks AC, I'll buy in at that point.
If I had a position, I would probably exit on open, and hope to circle around at a lower price. If the downside response is muted (which would be surprising), it would be easy enough to get back in.
If I was an investor in AC, I would be annoyed as Hell that this deal didn't go through, but probably do nothing. Yes, there might be a dent on this news, but investors are playing for longer term gains rather than quicker flips.
As far as the timing of this news release, that's what you do when it's bad news. You release it on a Friday, and hope the market forgets by Monday. I don't think there will be any forgetting here on this one, but it is the best day to release the news all things considered.
No doubt, Monday will be interesting no matter what happens. But between now and then, here's a cheer for fruitful discussion, both for and against. But just blowing sunshine wastes everyone's time.