Ryanair shares fell sharply on the Dublin and London markets yesterday after the airline announced plans to place up to 30 million new shares - or just more than 4 per cent of the existing equity.
Market sources believe the new shares will be placed somewhere between €6 and €6.50 a share, and that Ryanair will raise €180 million (£142 million) to €195 million before expenses. At the close in Dublin, the shares were down 63 cents on €6.20.
Given Ryanair's conservative accounting policies and preference for large amounts of cash on its balance sheet, and the recently-announced airline order from Boeing, there was no great surprise in the market at either the timing or the size of the placing.
The placing will be priced on Friday, and market sources believe the full 26 million shares and the four million "greenshoe" over-allotment options will be heavily oversubscribed.
But unlike previous placings, this one does not involve share sales by any of Ryanair's directors. On previous occasions, chief executive Mr Michael O'Leary and the Ryan family have sold sizeable amounts of stock.
Ryanair will pay for the 100 Boeing 737-800 it has ordered in stages over the next decade, and Merrion analyst Mr John Mattimoe said the proceeds of the placing were likely to mean it would be 2005 before Ryanair went into a net debt position. By then, Ryanair's fleet will have more than doubled to 89 aircraft, 72 of which will be the higher capacity Boeing 737-800's.
Passengers are expected to double from the current 10 million a year to 22 million in the same period.
The 30 million shares being offered to European shareholders will also have the effect of boosting the proportion of European shareholders to around 55 per cent. Under current EU legislation, more than 50 per cent of an EU airline's shares must be held in Europe, a restriction that is expected to remain in place until an "open-skies" arrangement in Europe becomes a reality. This is unlikely to happen for at least two years, industry sources believe.
Currently, it is understood that the split between European and American investors is about 51-49, and to prevent the American component breaching the 50 per cent threshold, Ryanair has put in place a mechanism that could result in new US investors having their shares compulsorily acquired.
From next Thursday, anybody who buys Ryanair shares will have to certify that they are EU nationals, or else the shares they buy will be designated as restricted shares.
Holders of these restricted shares will be required to sell them to an EU national within 21 days and, if they fail to do so, Ryanair will be entitled to sell them on their behalf.
From last June, Ryanair shareholders were no longer allowed to swap their Dublin and London-listed Ryanair shares for the Nasdaq-listed American depositary shares (ADS), and this restricted the ADS programme.
This restriction has meant that the ADSs have tended to trade at a small premium to the underlying shares traded in Dublin and London. The price reflected the premium US investors were willing to pay to be sure that they did not run foul of the EU rules on airline ownership.
