Aer Lingus worth €1.5bn

[Dipole]

The pilots in Aer Lingus purchased 2% of the company for €30 Million. Doesn't that value the company at €1.5bn?
If so why doesn't the government now have €1.5Bn in the national retirement fund or being ploughed in to infrastructure now.

Seems the public got a very poor deal on the sale of Aer Lingus.
I question the wisdom of the government retaining shares in Aer Lingus - what return are they getting on them.
I question the employees right to any shares too. Yes, they are stakeholders but who said they should be shareholders.

Was the sale of Aer Lingus a floatation or a firesale?

Will the ESB floatation be any better?

We're running out of assets we can sell now and this government seems to be intent on just giving them away.

 

[Guest127]

the esb dont have a michael oleary in opposition to them, and never will judging by last weeks panic reaction by the government to criticism of the way esb is being run. it's a gold mine now and will be in the future - one way or another.

 

[TarfHead]

The pilots in Aer Lingus purchased 2% of the company for €30 Million. Doesn't that value the company at €1.5bn?
If so why doesn't the government now have €1.5Bn in the national retirement fund or being ploughed in to infrastructure now.

Seems the public got a very poor deal on the sale of Aer Lingus.
I question the wisdom of the government retaining shares in Aer Lingus - what return are they getting on them.
I question the employees right to any shares too. Yes, they are stakeholders but who said they should be shareholders.

Was the sale of Aer Lingus a floatation or a firesale?

Will the ESB floatation be any better?

We're running out of assets we can sell now and this government seems to be intent on just giving them away.

The pilots paid top price for their shares. This morning the shares are trading around €2.95 - the pilots share is down 1.6% - have they 'lost' that money ?

The valuation of the shares in Aer Lingus is market driven. The Government had to pitch the price to make it attractive for investors - they had to be undervalued.

That's capitalism for you - red in tooth and claw. If you don't like it, buy a one-way ticket to Cuba or stand as a candidate for the Joe Higgins collective in the next election.

 

[Humpback]

That's capitalism for you - red in tooth and claw.

Which is why I wouldn't jump to any conclusions yet as to why the pilots have purchased a 2% share of the company.

Firstly, and most basically, though the market price of their shares has fallen a little already as mentioned above, any new (expected) offer price from O'Leary will be at a premium to the current share price - maybe €3. Therefore, their shares will be increased in value.

And given, if press reports are correct, that pension fund money was invested here, the primary purpose of the investment must be for longer term gain, making a purchase of 2% as a blocking share would not necessarily be following such a strategy.

Which takes me to my more important point. Given that the pilots in Aer Lingus have for some time "ploughed their own furrow" within the company, who's to say that the 2% they've purchased isn't intended to sweeten the deal that makes them Ryanair employees down the road.

A committment to sell this 2% to Ryanair could pave the way for some golden handshakes for the pilots as they become part of Ryanair. It happened when Babcock & Brown negotiated a deal with the Eircom ESOT in that recent takeover.

I think it may be dangerous to assume that this 2% is actually a blocking share at all as all commentators are assuming. If they sell their 2% at a premium to O'Leary, and at the same time guarantee their new working conditions, the pilots will have looked after their future working careers, plus their retirement in one fell swoop.

 

[Dipole]

The valuation of the shares in Aer Lingus is market driven. The Government had to pitch the price to make it attractive for investors - they had to be undervalued.
quote]
and there was me thinking that shares were valued according to the dividend they produced or expectations as to growth and future value of the company in which the shares are held.

 

[Dipole]

Tarfhead appears to be of the opinion I object to inessential state assets of questionable national importance currently being operated inefficently being sold off. Tarfhead shouldn't jump to conclusions so quickly.

 

[TarfHead]

and there was me thinking that shares were valued according to the dividend they produced or expectations as to growth and future value of the company in which the shares are held.

Yes .. all of that, and then a discount to make sure all shares are sold so that the sale can be declared a political success.

With regard to your subsequent post, the point I clearly didn't make is that the market price of the share does not indicate the atomic value of the underlying assets. It's the price someone is, or many people are, prepared to pay.

Is Youtube worth €1.6 billion ? Will Google get a commesurate return on investment ? Who knows (least of all me) but it's the price they were willing to pay.

 

[Dipole]

Going by that reasoning a price someone is willing to pay is determined by the object being sold, not who is selling it so why can't the Government achieve the price.

 

[Humpback]

so why can't the Government achieve the price.

Because they held on to 28%. Because the unions had 12%. Because there was a stipulation that no less than 50% ownership had to remain in Irish hands.

All of these conditions reduced the actual value of the company down to the value which it was sold at in order to get people to overlook those issues and actually purchase.

 

[Sunny]

I question the employees right to any shares too. Yes, they are stakeholders but who said they should be shareholders.

Why shouldn't the staff get shares? I would imagine that most if not all public companies give their staff an equity interest in the company. Good luck to them.

 

[Dipole]

So all of these constraints were introduced by government responding to small vested interest groups at the expense of the public finances.
Back full circle to my initial post that our Government just follows the path of least resistance and gives assets away.

 

[Dipole]

Why shouldn't the staff get shares? I would imagine that most if not all public companies give their staff an equity interest in the company. Good luck to them.

You justify why any employee is entitled to any more than their wage giving nothing in return!
In my company which exists in the real world we may have an option to purchase shares but the discount to open market is small and paid for in terms of considerable future commitments to the company and future performance.

 

[TarfHead]

.. our Government just follows the path of least resistance and gives assets away.

So, following your argument, the Government should pitch the offer price as high as they can get away with ? If the market price subsequently collapses, then so what sure haven't the Government coffers been filled ?

Like the eircom float ?

 

[Meccano]

As I understand it - and its in the public domain if you care to look - the staff in Aer Lingus EARNED about 3% of their shares through profit sharing incentives over the last 6 years. The shares were part of their income in other words, contractually accepted in lieu of pay increases, and in reward for performance and decreased working conditions.

The other 11.9% is NOT being GIVEN to them - they are BUYING it through further foregone wage increases and performance pay over the next number of years. They do not own the shares yet - they are not individually just 'handed over' to them to run off and sell.

Whats your problem with that - sounds fair enough to me. Especially in light of the fact that they largely co-operated with the sale and surrendered government backed stability in their futures!
Disastrously as we now see!

 

[Humpback]

Why shouldn't the staff get shares? I would imagine that most if not all public companies give their staff an equity interest in the company. Good luck to them.

Please elaborate on your definition of "give"? In my experience, the public companies you speak of provide mechanisms in which employees can purchases shares in their own company at some kind of immediate or long term discount.

As far as I'm aware, it's only the Government who "give" away shares to their employees, and in fact, had to change legislation to ensure that employees weren't taxed on this benefit the received.

 

[Humpback]

The other 11.9% is NOT being GIVEN to them - they are BUYING it through further foregone wage increases and performance pay.

Are these foregone wage increases and performance bonuses something that were contractually promised? Or were they notionally indicated that they could be provided?

Important to distinguish. Shares would be paid in the former case, but given away in the latter case.

Especially in light of the fact that they largely co-operated with the sale and surrendered government backed stability in their futures!

These people are employees - as you say yourself, they're monkeys in terms of them getting paid to do whatever they're told to do, and just do it (or are Aer Lingus staff different from Ryanair staff).

They co-operated under duress. Well, they didn't co-operate at all, the government just went out and did what they wanted because they were the owners of the company. The in effect had to do like any other employee would do if their company was being sold or taken over - they had to just suck it up and take it.

What makes Aer Lingus employees so special that they get shares in the company, and the rest of us having to just take it, like it or not?

 

[TarfHead]

As far as I'm aware, it's only the Government who "give" away shares to their employees

FWIW .. AIB & Bank of Ireland 'give' stock to staff, valued as a percentage of salary. The percentage depends on profit and cost targets.

The shares are held in trust for 3 years so are tax-free. The only tax payable is CGT when they are sold.

Alternatively the individual employee could receive a cash payment to the same value & that is taxable.

 

[Humpback]

FWIW .. AIB & Bank of Ireland 'give' stock to staff, valued as a percentage of salary. The percentage depends on profit and cost targets.

The shares are held in trust for 3 years so are tax-free. The only tax payable is CGT when they are sold.

Alternatively the individual employee could receive a cash payment to the same value & that is taxable.

That's fine. No problems there. The staff are receiving the stock as a bonus depending on targets achieved.

They're not receiving them just because they're employees. Back to my question to the Aer Lingus employee. Sorry, over to you meccano.

 

[Sunny]

That's fine. No problems there. The staff are receiving the stock as a bonus depending on targets achieved.

They're not receiving them just because they're employees. Back to my question to the Aer Lingus employee. Sorry, over to you meccano.

They are given just because they are employees so they can share in future performance of the company. Performance related bonus is seperate. At least it was for me when I worked for BOI.

 

[TarfHead]

That's fine. No problems there. The staff are receiving the stock as a bonus depending on targets achieved.

They're not receiving them just because they're employees.

Well .. sometimes .. the stock allocation is related to corporate performance, not individual. If you sit there dossing all year, you'll get the offer of stock, same as the person who gave it their all.