Don't believe the pop: History suggests Virgin won't sustain its stellar ASX start
The Virgin Australia float always appeared geared for short-term success — but over the long term, it's a very different story.
In the weeks leading up to the long-awaited Virgin Australia IPO, veteran fund managers, brokers and well-placed market sources told Capital Brief they expected a strong short-term performance — even if they weren’t buying it themselves.
On Tuesday, that thesis was proven correct: a stripped-back and simplified Virgin, offered to investors at a significant valuation discount to Qantas, took off in this market, with the share price closing 11% higher on its first day of trading.
But many remain sceptical that a highly cyclical, capex-heavy business has legs as a long-term investment. As one fund manager who declined to buy in quipped: “I suspect in two to three years, we’ll all look back and ask, what were we thinking?”
ASX history doesn’t offer much encouragement for companies that surge out of the gates.
