Originally Posted by
Taildragger67
Actually the point has been raised - and it's a valid one - that if EIN's directors only recently signed off the prospectus and accepted a certain valuation, how can they now say that RYA's rather higher offer 'undervalues the business' unless there has been a material adverse change in EIN's situation, in which case they should have re-written the prospectus?
Floats usually do go off at a discount to fair value so that it rockets up on day one and looks good on the market. But it's disingenuous for EIN's directors to say that RYA's offer 'seriously 'undervalues the business' because by implication they're then saying that they even further undervalued it when setting the float price - in which case the Irish finance minister should be all over them like a rash.
There are some interesting points to ponder in this. Obviously, no business is just worth €x bn. It will be worth different amounts to different people at different times, even if the business is exactly the same. Valuation is as much an art as a science.
It is difficult to imagine that the airline was privatised at an unduly low price, seen from the point of view of the institutional investor. Otherwise, the price would have rocketed immediately it came to market as everyone tried to get their hands on a bargain. Clearly it wasn't seen as such.
Once a company is in play, though, everyone's perception of the value of the business changes simply because the value is altered by the very fact that someone has said that they are prepared to pay more for it than had previously been the case.
So two areas of question arise:-
- [*]
Financial experts will no doubt have some views about whether, and if so what, this says about the health of and organic growth prospects for Ryanair on its own.