According to The New York Times, Japan Airlines (JAL) is expected to price its IPO later today, and the capital raise could come to as much as $8.5 billion. That would make it the No. 2 new offering for the year, behind Facebook (NASDAQ:FB), which raised $16 billion back in May.
It seems that the U.S. isn’t the only country with troubled airlines. The same goes for Japan: JAL went bust in 2010 and needed a government bailout.
Interestingly enough, the bankruptcy turned out to be a savvy move. JAL has a much better cost structure and has streamlined its routes and fleet (such as by focusing on midsize planes). In fact, the Japanese government is expected to snag a $4 billion profit!
But going forward, JAL still faces challenges. With slowing global growth, such as in Asia, revenue will be pressured. JAL also must compete with fierce rivals like the Emirates and Singapore Airlines.
IPO investors, however, don’t seem to care because demand for the IPO is robust. Then again, JAL is a top brand and should continue to post strong profits — at least for next few quarters.
Tom Taulli runs the InvestorPlace blog IPOPlaybook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned securities.
A long-time follower of the IPO scene, back in 1999 Tom started one of the first sites in the space called WebIPO. It was a place where investors got research as well as access to deals for the dot-com boom. Tom also wrote the top-selling book, Investing in IPOs. In it, he covers all the aspects of analyzing an IPO, such as reading the prospectus, detecting the risk factors and understanding some of the arcane regulations. But don’t worry — if that process is too intimidating for you, thankfully Tom will do the legwork for you right here in the IPO Playbook blog.
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