Virgin Australia shares soar 8.3% in $439 million IPO debut

By Scott Murdoch and Christine Chen

SYDNEY (Reuters) -Virgin Australia shares rallied 8.3% on Tuesday, after its A$685 million ($439 million) initial public offering, a transaction dealmakers hope will revive a subdued listings market.

The airline sold 236.2 million shares at A$2.90 each, valuing it at A$2.32 billion on a fully diluted basis.

The stock began trading at A$3.14, outpacing a 1.2% gain in the Australian benchmark S&P/ASX200.

Virgin’s listing comes amid operational disruptions, with the airline diverting two Qatar-bound flights to India and Oman, according to flight tracking website FlightRadar24. Qatar temporarily closed its airspace ahead of Iran launching missiles at a U.S. base in the state. Virgin did not immediately respond to a request for comment from Reuters.

Shares of Qantas, the main rival to Virgin Australia, climbed 4% on Tuesday following a 7% drop in global oil prices the previous day, after Iran took no action to disrupt oil and gas tanker traffic through the Strait of Hormuz.

Virgin disclosed in an exchange filing that it has hedged 98% of its anticipated fuel usage in Brent crude oil at a cap of $70 per barrel for the first half of 2026. It has hedged 86% of its anticipated fuel usage at the same price in the second half.

"Four years ago, with the help of Bain Capital, we set out to transform Virgin into a simpler, more focused company with a clear view on how are we going to serve our customers and how are we going to win in the Australian domestic market," Dave Emerson (NYSE:EMR), Virgin Australia chief executive, said at a listing ceremony in Sydney.

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Virgin, which is Australia’s second-largest airline by market share after Qantas Airways, was delisted in 2020 after private equity giant Bain Capital rescued it from administration.

Bain, which bought Virgin for A$3.5 billion including liabilities, will see its stake reduced to 39.4% from about 70%, while Qatar Airways, which recently bought into the airline, will retain 23%, the IPO prospectus showed.

The IPO attracted strong demand, with institutional investors lodging indicative orders surpassing the offering size during bookbuilding, according to a term sheet reviewed by Reuters.

The shares being priced at an almost 30% discount to those of Qantas were an incentive to buy, fund managers said.

Virgin has a domestic flight market share of 34.4% as of March versus Qantas’ 37.5%, a report from the Australian Competition and Consumer Commission showed.

"From our perspective, the IPO pricing offered an attractive discount to Qantas, allowing room for shareholders to benefit from Virgin’s operational improvement targets and structural tailwinds like the rise of premium ticket demand," said Jun Bei Liu, founder of Ten Cap which is a Virgin cornerstone investor.

"Virgin’s domestic focus and hedged fuel position provide resilience amid geopolitical and commodity market risks."

Virgin pared back its international business under Bain’s ownership. It has resumed long-haul flights to Doha through a lease agreement with state-owned Qatar Airways.

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