Author Topic: RR - Rolls-Royce  (Read 118451 times)

Xerxes

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Re: RR - Rolls-Royce
« Reply #310 on: August 03, 2020, 10:20:55 AM »
to give you an idea from RTX's Q2 results.

"I think, Rob, what you need to think about is, what is the actual number of aircraft flying today. We think itís the total flights are down about 50% and so well air passenger traffic is down 80%, which is better than the 95% it was. Thereís still planes out there flying around and around, again down 50%. Thatís really what weíre basing the outlook on."


i should add that with the statement above, one can get to the conclusion that the focus of airline economics are shifting from unit-costs to trip costs.


fareastwarriors

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Re: RR - Rolls-Royce
« Reply #311 on: August 07, 2020, 02:47:02 PM »

Value^2

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Re: RR - Rolls-Royce
« Reply #312 on: August 14, 2020, 07:31:05 AM »
Don't know why they didn't make an effort to buy more earlier.  They can issue current shareholders rights to buy one or two shares at £2.00 (a 20% discount... heck it could be for £1.00 and the economics wouldn't change).  Shareholders who don't want to participate can sell their rights to compensate for any dilution, and nothing is lost.  In fact they should just raise too much and return it in the form of excess dividends or buybacks as the course of assets, liabilities, and opportunities becomes more clear.  It's a company with quality assets and a lot of franchise value making important stuff.  They just need to raise enough to deleverage and have enough cash leftover to very reliably moot questions about unexpected capex or other contractual liabilities. 

Anyway trading near March lows today.  Maybe I'm missing something.  (Opened a position today).

One thing that always surprises me is how often companies raise capital at the lows. Your comment totally makes sense, but the same could have been said years ago when the share price was higher and some of these issues were known. I know East probably would have been crucified years ago by investors because the stock was "too cheap" then to be raising capital. Behaviorally its tough to raise capital when you don't need it for a potential, hypothetical time in the future when you may need it, but it sure beats the shit out of massively diluting yourself at the lows.

I'm always shocked when companies decide to do a  new issuance instead of a rights offering.
Rights offerings are massively more shareholder friendly in that you give your existing shareholder base first rights of refusal and the ability to participate at the same terms. It's slightly less guaranteed than a new offering (because you don't have to exercise the rights), but you're paying up for the that guarantee with the underwriters :/

I get it when you're in dire need of the money, but it doesn't seem to me that RR is knocking on deaths door.

Why is it more companies don't do this sort of thing?

At least one reason why companies prefer public offerings instead o rights offering is that, they wants to broaden shareholder base and be less influenced by large owners. Generally speaking those insiders who doesn't own meaningful amount of stock, hate to be accountable to the large investors.
« Last Edit: August 14, 2020, 07:36:13 AM by Value^2 »

Value^2

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Re: RR - Rolls-Royce
« Reply #313 on: August 14, 2020, 07:34:46 AM »

Activist shareholder ValueAct sells out of Rolls-Royce: source


https://www.reuters.com/article/us-rolls-royce-hldg-valueact-stake/activist-shareholder-valueact-sells-out-of-rolls-royce-source-idUSKCN2530HE?il=0


ValueAct had sold $1 billion of Valeant stock when it was near its high, before the Philidor revelations, but continued to own 15 million shares, telling its big investors that ďwe do not cut and run at the first signs of trouble. Instead, we roll up our sleeves and focus our efforts to try to preserve the long-term opportunities at the company.Ē


Different company, just wanted to point out their empty rhetoric.

TwoCitiesCapital

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Re: RR - Rolls-Royce
« Reply #314 on: September 30, 2020, 06:02:04 PM »
https://www.ft.com/content/feea2bfb-b5d7-4fd5-a2c9-b2429c5961e2

Rolls confirms equity raise for £2B - will not seek sovereign wealth involvement.

Thought I saw something about a rights issue - any one know if that has been confirmed?

Broeb22

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Re: RR - Rolls-Royce
« Reply #315 on: October 02, 2020, 04:05:18 AM »
I remember Steven Wood from Greenwood being one of the loudest proponents of this stock, and I remember him being very confident of his conclusions and that the outcome weíre seeing with a capital raise at the lows as being almost impossible. Has he had any recent updates?

Xerxes

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Re: RR - Rolls-Royce
« Reply #316 on: October 02, 2020, 08:36:00 AM »
Rolls got a direct hit due to the pandemic.
No one could have seen it coming. Last year this time if someone asked me the likelihood of an event that will have an outsized severe impact on the wide-body segment, I would have laughed.

At the end of the day, as great of an engineering firm it is, it was a one trick pony with an outsized exposure to wide body segment, which itself had an oversupply different models from Boeing and Airbus. (I.e RR got a double hit as it supplies the engines both for A330NEO and A350; the former overlaps with the bottom end of the latter)

TwoCitiesCapital

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Re: RR - Rolls-Royce
« Reply #317 on: October 02, 2020, 11:10:23 AM »
Rolls got a direct hit due to the pandemic.
No one could have seen it coming. Last year this time if someone asked me the likelihood of an event that will have an outsized severe impact on the wide-body segment, I would have laughed.

At the end of the day, as great of an engineering firm it is, it was a one trick pony with an outsized exposure to wide body segment, which itself had an oversupply different models from Boeing and Airbus. (I.e RR got a double hit as it supplies the engines both for A330NEO and A350; the former overlaps with the bottom end of the latter)

I think his point was that the comments were made after COVID. I believe I also saw something from them saying despite COVID, the company would have ample liquidity and not need to do a stock offering. Obviously that's not the case with them issuing £2B with a £2.5B market cap.


coc

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Re: RR - Rolls-Royce
« Reply #318 on: October 02, 2020, 11:17:28 AM »
Also another blowup for the Sequoia Fund. About 5% of their capital at cost, I think.

Broeb22

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Re: RR - Rolls-Royce
« Reply #319 on: October 02, 2020, 12:17:47 PM »
I just re-read Woodís June/July interview and he talks about a 35% FCF yield like what doesnít the market understand, and this is another good lesson for me where listening to what the market is saying is worth doing to an extent. A healthy large business going through temporary distress simply doesnít trade at those FCF yields.

Itís a delicate balance because you donít want to look at negative price action and bail, but Iím more thinking sometimes itís good to reverse engineer the expectations built into the price to get to back to a market average return.

Itís kind of surprising to me because I genuinely believe Wood is smart and very hard-working. But he seems lacking in humility or the ability to kill his own thesis.