SIA shares climb, after adjusting for rights issue, on hopes of easing lockdowns

The stock lost as much as 28.3 per cent or $1.675 to $4.235 within the first minute of the opening bell on May 6, 2020.
The stock lost as much as 28.3 per cent or $1.675 to $4.235 within the first minute of the opening bell on May 6, 2020.PHOTO: ST FILE

SINGAPORE (BLOOMBERG) - Singapore Airlines (SIA) shares, adjusted for a planned rights issue, rose on heavy trading on Wednesday on bets that ongoing fund raising will help the carrier survive as lockdown restrictions ease worldwide.

The shares surged the most since October 1987 in the morning, soaring 21 per cent to $5.04. The stock pared its advance to close up 5.7 per cent at $4.40.

Some 48.79 million SIA shares changed hands, making it the second-most traded counter on the Singapore bourse on Wednesday. 

SIA unveiled in March plans to raise about $8.8 billion by rights issue and convertible bonds to contend with the devastating impact of the coronavirus pandemic. Investors had until Tuesday to buy the stock to be entitled to any rights.

Back in March when SIA proposed the fundraising, the theoretical ex-rights price (TERP) was $4.40 per share - assuming the completion of the rights issue at that time and calculated based on the last transacted price of the shares of $6.50 on March 25, 2020, which was the last trading day prior to the announcement.

The TERP is now $4.164, calculated based on the stock's closing price on Tuesday of $5.91.

SIA shares opened $4.235 on Wednesday and were trading at $4.62 at 4:32pm.

"The reopening of economies coupled with the billions of dollars Singapore Air has raised will help it recover some of the lost ground," said Justin Tang, head of Asian Research at United First Partners. "The fact that investors including Temasek are subscribing rights and other instruments of the company shows it is not a lost cause."

Airline stocks globally have been getting a lift on a slew of reopening news. Indonesian operator PT Garuda Indonesia Persero saw its shares jump 13 per cent in the past two trading sessions. Qantas Airways rose on Tuesday despite warnings of a years-long revival.

The pandemic has plunged global aviation into an unprecedented crisis. Airlines could require as much as US$200 billion in government aid and bailout measures this year to survive, according to the International Air Transport Association.

 
 
 

The carrier can raise as much as $9.7 billion in 10-year mandatory convertible bonds and has also arranged a $4 billion bridge loan with DBS Bank Ltd. to support near-term cash requirements. State investor Temasek Holdings, the carrier's biggest shareholder, said it would back the fund raising.

The company didn't immediately reply to a text message seeking comment on the funding plan.

"The air corridors will open eventually and Singapore Air is better funded than the competition," said Nirgunan Tiruchelvam, an analyst at Tellimer.

With additional information from The Straits Times