Air Canada managed to sell its desired $850 million worth or 35 million shares in the over night marketed deal. As I expected the price came in at the lower end being $24.
Also as would be expected this has knocked the share price down in the market. Currently it is down 10% to $23.67.
I took a look at the supposedly strong balance sheet. They do have cash and short-term investments of $7.8 billion. That’s up from $5.9 billion at the start of the year. That sounds good. But all of that increased cash came from new borrowings plus a share issuance that raised $552 million in June. And that cash is offset by many liabilities. As of Q3 book value of common equity amounted to just 17% of its debt level.
The equity market cap (before the new shares just issued) is $7.0 billion which is relatively strong (or at least not terrible) in relation to its $10 billion in debt.
Overall, I would not call this a strong balance sheet.
Air Canada needs the pandemic to end and it is relying on the federal wage subsidy and hoping for additional assistance to try to get through unit it ends.
Unfortunately for Air Canada much or most of its wage subsidy will have been paid out to workers who are not able to productively work and bring in revenue due to the lack of passenger demand.
I would consider Air Canada shares to be highly speculative. I am not interested in buying any. The company is dependent on further government assistance and may have to give up some equity ownership in return for that assistance.
The government will insure that Air Canada continues as a business and will try to look after the employees and retirees. But there can be no assurance that the share price will rise or will not head far lower.