Good bye pandemic struggles and hello acquisitions for Qanny.
๐ Background: Things have been tough for ol' Qanny lately. The company actually sold a massive block of land near Sydney Airport to pay down some of the crazy debt it accumulated during the peak of the pandemic.
๐ What happened: Earlier this week, Qantas said it would return to profitability as early as next financial year... and it's now marked the good news with a $614 million purchase: charter flight operator Alliance Aviation.
๐ What else: There won't be any dollars switching hands, because it's an all-scrip deal. Qantas is issuing new shares worth $614 to fund the purchase.
๐ก Share dilution is when a company issues additional shares, sometimes to fund an acquisition. While it's often seen as good for the company's long-term growth, it can reduce the value of existing investors' shares.
๐ก Let's say a company has 100 shares and you own 50 of them. If the company issues 50 new shares, there are now 150 total shares. That means your 50% stake just turned into 33%. That's share dilution, and it reduces your slice of the company pie ๐ฅง.
๐ก There might not be heaps to celebrate here for existing Qantas shareholders in the short-term, but the hope is that Qantas' performance (and share price) increases in the long-term as a result of the acquisition, and makes it all worth it ๐.
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