value of shares

[flyingscotsman99]

How do you value a share in an aircraft? You could say 'what is it worth to you?'. You could say 'shop around and compare', but is there a typical premium of share value to total aircraft value?
In my case I am looking at a well-run group, perhaps rather large, with a quality aeroplane and a good number of professional pilots. It is kept at the dealership airfield and the dealer himself is one of the group.
Being retired I think the size of the group may be OK because I can be flexible and I have other interests as well.
But is there a logical way to approach valuation or any general principles?
This relates to the Uk btw. Experience in the US might not necessarily apply. Any opinion gratefully received!

[jollyrog]

The aircraft will have an "agreed value" in the insurance policy. Use this as a guide.

Agreed value + value of other group assets + money in bank / number of members

... should be a good start.

[Lister Noble]

We have a group of 14 sharing an L4 Cub,we each have equal shares and the value is roughly based on the percentage of aircraft value,but it is not monitored or controlled.
We also have a substantial engine fund that does not feature in share value.

Out of our group I would guess half of us fly regularly,some a bit and some hardly at all.
We use e-allocator for flight booking and messaging,as well as e-mails.
We have one meeting per year to discuss funds and any other issues.
It all works very well and is a friendly and workmanlike set up.

Lister:)

[gasax]

Generally group shares are priced above the percentage valuation of the aircraft. There would be good reason for that if there was a good engine fund or other assets. But in most cases it is simply supply and demand. The smaller the share cost the easier to over price it and still sell the share.

It gets even worst if you try and buy a group aircraft - then there will always be one or two members who are sure the aircraft is worth more and are almost bound to nix a sale!

So as a general guide - the percentage of the aircraft value (which is frequently much less than a group thinks) plus whatever premium a group think they could/should charge.

[josher]

interesting question - there may be several 'values' The insured value, the sale value, the replacement value, and in the case of a vintage a/c maybe the rebuild value which is likely to be the highest of the four. Like most I think the group I'm in has based share value on the insured hull value which I has probably undervalued the a/c if we had to rebuild or replace it following a serious 'event'. I imagine many others operate in the same situation

[AdamFrisch]

I've had very heated arguments in another (type specific) forum about valuations with people who refuse to accept the fact that their beloved aircraft is actully worth less than they paid for it.

Problem is that many people bought aircrafts or shares back in the days when old spam cans actually appreciated. It was a fluke, a strange anomaly that occurred for some years mainly due to demand, the good times that prevailed and the lack of newly manufactured aircraft. None of those factors exist today and that bubble market is gone.

But not only that. It used to be the case that if you bought an aircraft for 10K with a run out engine and then spent 20K on overhauling it, you could turn around and sell the whole mess for 30K. Engine funds were even something you could take out loans against. That's also gone or at least going.

And some of the most overpriced stuff I see are the shares. It's not uncommon to see a quarter share going for as much as an equivalent aircraft would cost on its own! Open any flying magazine and you'll see overpriced aircraft and shares re-listed and re-listed ad nauseum without the sellers taking the hint.

It has never been more of a buyers market and what you put in to an aircraft in overhaul or upgrades, you simply will not get back. This has been true for cars for decades, so it's actually about time aircraft aligned.

Buy outright now if you can afford, is all I can say. Never been a better time.

[BackPacker]

We also have a substantial engine fund that does not feature in share value.

It depends on what you define as "share value". But if you define "share value" as the amount of money I need to pay you to take over the ownership of your share, then I think it should be included. After all, if I bought all shares that way, I also become the owner of the engine fund, don't I?

Look at the aircraft "group" as a limited company. It's got assets, primarily the aircraft but also any cash reserves, spare parts, fuel in the tank, can of oil in the drawer, maybe a prime spot in a hanger that others would be willing to pay money for, or a lucrative and rare contract for cheap landings. All these assets should feature on your virtual "balance sheet". On the other side, you also might have liabilities. A loan perhaps, or maybe members have deposited money for flying in advance in the groups bank account. These should be deducted from the groups assets. And whatever is at the bottom of that balance sheet is what the total "group" is worth. Divide by the number of shares and you get the fair share price.

Obviously the airframe itself, in the current market, is very hard to value and that makes the share price hard to value. So at the end of the day there is still a matter of finding someone who is willing to believe your balance sheet, and actually put down that amount of money. But that doesn't mean that for the rest you shouldn't be following sound accounting principles.

[Lister Noble]

Sorry,but our system has worked for many years based on insured hull value,and shares change hands now and again,but normally to friends.
Maybe we are really much nicer people up here in Norfolk;)
Trust in your fellow man,not so easy nowadays:)

[Guzzler]

A. What it's worth to you.

As an example a friend and I have just invested many tens of thousands in our aircraft. We know we would not be able to sell it for anything close to the cost to us. We have insured it for a figure between those 2 numbers and would not consider selling it for at least 120% of what we paid.

All that said I agree with most of the above posts with one proviso - add in how much the group size and personalities are worth to you.

[IO540]

I've never actually been in a syndicate (merely looked at setting some up, years ago) but it seems to me that a lot of shares are being advertised at way more than the corresponding whole plane could possibly be worth.

Presumably there is an element of how keen the departing member is to get out. I have seen situations where a member wishing to depart had agreed (with another member(s) also wishing to depart) to not sell below a certain figure, and this will prop up the price - until somebody snaps and sells anyway.

IMHO a more important thing (than the cost of the share) is what kind of people make up the group. Most groups have issues of various sorts; a popular one is perpetual a VFR v. IFR dispute, where "IFR" avionics don't get fixed, and those groups see a steady stream of IFR-capable members who join and then jump off when they realise they will never get agreement to fix the stuff.

[Lister Noble]

I agree with that.
The most important element are the members,we all get on extremely well and I can't remember a single disagreement that wasn't settled by discussion.

Our group consists of members,several of whom have their own aircraft but like flying a bit of history.

The Cub L4 is very simple,basic instruments,nice to fly,some actually go quite long distaces in it, and we are also asked to take it to miltary historic airshows.
I remember flying into one place and being asked if I minded parking next to the Mustangs etc.

Lister:)

[kevkdg]

Just reading this thread with interest.

I am currently contemplating a share in an 8 person syndicate.

I have seen two of the same aircraft type (Motor Glider) for sale at £12k on AFORS & Glider Pilot.net. So as a bench mark this is a start.

However, the share I am being offered (in the same type of aircraft) is for £2.5k. As this is for a 1/8th share that values the aircraft plus syndicate assets etc at £20k.

The chap selling the share explained to me that comparisons with other aircraft don't work, as buying an aircraft with no where to put it (locally to where I live) might be a problem. PLUS it's an existing and very well-run syndicate with spare engine and prop, parts etc pluis some cash in the bank, there are also skilled members who are able to do the work on the aircraft themselves etc - a different proposition altogether. There is also a premium for being able to keep an aeroplane at a site with excellent facilities and runways and cheap hangarage (no more space available at this local site to me either)

So, this is the advice I've been given, just thought I'd pass it on.

For me it is ideal and convenient to where I live.

[Genghis the Engineer]

kevkdg - I think that what you're being told is about right.

On the other hand, it's still a free country, and you have every right to try and haggle him down. The odds of succeeding are in your favour, simply because there are a lot of shares and aeroplanes for sale at the moment and it's a buyers market.

G

[blueandwhite]

Kevkgd

The chap selling the share explained to me that comparisons with other aircraft don't work,


Well it certainly "don't work" in his interest! :)

Some people buy an aircraft then sell 4 shares for a quarter of what they paid. So end up with one or two shares at zero cost. If you spot it you will get all the explanations you mentioned.

Is it worth the extra to you? Will it be worth it to whom ever you sell it to? Are you willing to take a lose on selling?

I know of a motor glider group that sound very like yours - its not "yours" but the same set up - shares can be had very cheaply as people often struggle to sell them.

I've been in really good groups, and one really :mad: one.

[Lister Noble]

kevdg,
I think you are not being ripped off,the spare engine and prop are worth a fair bit.
Plus you have a well run local group with everything set up.
If you haggle,don't push it so much that you lose it.
I would just ask if there is any room for a reduction in price of share,if he says no,then go for it anyway.
Just my thoughts,of course
Lister

[kevkdg]

I offered £2k, but he said he would go no lower than £2,300 as there are benefits to him for a quick sale and thus he won't need to advertise.

PLUS, he will give me his time free of charge to get me up to speed with the aircraft and site (a requirement of the syndicate & gliding club) even though I have 70 hours on that type (Slingsby T61F Venture) at a different Gliding Club. The guy is a qualified CAA examiner and instructor.

The monthly rate is £35, and £18 per hour wet. Cheap and cheerful flying in Ventures, even if they are slow!

[Lister Noble]

Kev,that's brilliant,we have an hourly charge of £35 wet and no monthly charge.
happy and safe flying
Lister:)

[kevkdg]

Whats that flying in at £35 per hour wet no monthly?

[Lister Noble]

L4 Piper Cub,genuine WW2 aircraft in military markings,shares are not expensive either,but a hell of a waiting list.;)
In fact there is no official waiting list as friends usually sell to friends.:)

[flyingscotsman99]

I am grateful for some really useful replies to my original question.
In my case the aircraft I am looking at is a Cirrus, so the figures, even for a group of 12, are quite large. I am sure it is good advice to buy outright if possible. A new Cirrus is a snip at around £250,000 (base model, of course). I will have a look down the back of the sofa later to see if I am anywhere close. Thanks again everybody.

[IO540]

I'd be a little careful with share prices in a Cirrus, because they depreciate rapidly, but the depreciation may well not be reflected in the share price.

The market for Cirrus shares is also not going to be the same as the market for e.g. C152 shares. I know of a few people who are in the Cirrus "147" type groups (where you purchase a block of hours, basically) and they are paying an eye watering hourly rate, but they are apparently happy to do so because they get a decent plane which they can walk away from after the flight. I suspect that a calculation of value for money relative to the actual aircraft value doesn't come into it, in the way it might with a "spamcan" share.

Another thing is that groups around advanced planes will work well only if each member has pockets of the appropriate depth and are willing to stick their hands in periodically and are compatible in their expectations of how much stuff needs to be working (a very rare combination in UK GA ;) ). This is true for all shares of course, but imagine a plane whose panel alone is worth about £100k.

I fly an "advanced" plane myself (though not as advanced in gadget terms as a latest SR22 can be) which I bought new 8 years ago and while I don't regret it for a moment, it is not for the faint hearted. There is the potential for huge amounts of downtime, too. So check the records for past avionics issues very carefully.

[Flyin'Dutch']

The value of a share is ultimately only what someone else is willing to pay for it (and that principle goes for the whole aeroplane as well of course)

Factors are

Location
Group (size and philosophy)
Type
Fringe Benefits
Aircraft Value

Whatever you do make sure that the group is the right one for you; if it isn't you may have to write off your investment.

I (as have most people) have only positive experiences but judging from what one sometimes hears it can be an awful experience if there is a massive fallout (including going to court etc)

Yuk

[blueandwhite]

The Cirrus groups that effectively buy blocks of hours and the non-equity groups are a very different set up from spending a few thousand to buy into a motor glider group.

You pay relatively MORE to buy into the motor glider group on the assumption that you will get something back. (when I say you pay relatifully more - I mean the post above where some one seemed quite prepared to pay a premium above the value of the aircraft to buy in the group)

The non-equity groups you don't expect to get get anything back. Just pay for your hrs, and maybe monthly fees. Then walk away at the end.

[kevkdg]

I'm not sure now I can/will pay £2,300 for the share. I've only managed to cobble together £2k and then would still need to pay membership at a club I'm not currently a member of which is another £300.

Am concerned by the comments that Slingsby are likely to orphan the Type Certificate as well, not a problem except that according to some sources, the LAA will not take it on either!

Decisions, decisions.

[Rod1]

If you look at recent history it is far more likely that the LAA are actively campaigning to take the aircraft on.

Rod1

[kevkdg]

I've been looking on gliderpilot.net, and have ascertained that a guy is rallying together T61 owners. Is there any links to info about the LAA wanting to take it on... Would be great if it was under permit to fly. I'm a cautious guy and before I invest £2k+ I like to understand the implications.