When to IPO and when not to IPO?

This question is just out of curiosity ... I am not contemplating IPO for any of any airlines ATM (and some even cannot as they are holdings).

But my question is: The airlines that want to expand, when the moment comes they decide to go IPO, I am curious how much cash do they have on hand.

In other words, what is the cash base when it makes sense to go IPO, and what is the cash base to stay private?

E.g. if you have 20 million cash and decide to do IPO, I guess it can make sense to line up additional expansion capital.

But what about

- 100 million

- 250 million

- 500 million

cash in bank

Does it make sense for IPO at such stage? Why would you do IPO with 500 million in bank and 60+ million in weekly cash flow?

I am looking for answers from people that run big companies and have gone through IPOs.

Thank you.

I ran my IPO whe I realized I needed help in quashing my competition in my main hub. I also didn't want to wait so late that it took a lot of subscribers to get to 50% of offered shares. So I went pretty early and ended up getting five planes which put me over the amount my competitor had, and after that, it's been cake squeezing him and others out.

There's not really a mathematical answer to this. You do it when it will benefit your company the most. If you go too early, you won't get much in your IPO. If you go too late, it might take several tries to get the IPO to take.

The only thing I don't like with the IPO is paying out $10+ million per week right after paying salaries. That's a huge chunk of money that takes me about a day and a half of saving up for, which means no spending money when I see $25 million in my bank. Hard to do that. The fake AS cash burns a hole in my pocket.

I never IPO. Too many disadvantages.

It is always a matter of strategy.

You may use an IPO for

… speed up growth

… improve cash

… move into new markets

… reduce risk in single markets

… shift resources from one to another market

… improve ROE of holding company

It will always depend on the situation of the holding company and the unit you intend to put on the market.

In later stages, there is a bias against IPOs, as with more and more cash on hand, ROE is declining. But still, looking at Fornebu, there are thoughtful later stage IPOs.

I did an IPO once for my airline which was worth around 2 billion. Raised 340 million to launch a new subsidy to compete against a big player.

No problem doing IPOs later, but make sure

a) you have a good network of successful players who will be ready to invest.

b) you are willing and have the time to market your IPO (send ingame messages to the biggest players, post on forums etc).

c) be prepared to give up a little on the price (getting 200% subscription for such a big IPO is close to impossible, but I still managed to get 170%!). Less %wise, but much more absolute $ wise.

d) USE IT! other wise it just sits there not giving you a return.

I probabbly had 100m cash at hand at the time of the IPO, but I was constantly ordering planes for my main airline, and equally wanted to go big on the subsidy to compete against the other guy.

Raised 340m, added 60m from my main airline to launch subidy with 400m. turned it to 550-600m in a couple of months.

I think the disadvantages outweight the advantages by far, at least for your main airline...You are getting quiet an amount of money but you will have to pay it back every week...when there is growth in the game world people who didn't go for an IPO will make more money (as they dont have to pay a part of the money they make to other airlines) and expand faster than the people who decided in favor of an IPO. It may make sense for a subsidary though. I have for example a regional subsidary which wasn't founded with the goal to grow extremly fast, but rather to supplement the main company in smaller markets and to generate connecting passengers. So growth is limited at some point (as it will interfere with the main company if it grows too much). In this case it may make sense to go for an IPO to get some money in the holding which can be used to build terminals/buy and lease out aircrafts etc...

One of the main reasons I really did my IPO was the ease in shifting money around. It may seem counter-intuitive, but if you have a holding and a main airline subsidiary, you can run an IPO and 80% of 15% of profits would automatically go back to your holding.

Right now, my main airline is kicking out about $10-$12 million in dividends a week. My holding still has right about 80%, so that means $8-$10 million are going right back into my holding. No money lost. The other 20%, which comes out to be about $2-$3 million, is split up from other companies. However, I have another subsidiary that is going to be my main stock holder/subscriber in other companies. A lot of companies that participate in an IPO are wanting to sell their stock back as soon as it doubles in price. With the price still being low, I can use my other subsidiary to buy up the stock people want to sell (or use my holding company, too). That means more than 80% is coming back to my company. The net result is that I'm losing about $1-$2 million a week in profit, which amounts to about 2 to 4 hours of real time flights.

Considering that if I wanted to shift that money around in my subsidiaries by using the transfer-sell plane trick, and got one of the cheap planes to do it (so you aren't losing $20 million at the beginning), it would take at least that amount of time to transfer the money from my main airline back to my holding or another subsidiary.

Also, keep in mind you can transfer money with stocks between your holding and subsidiaries, so long as you use the current closing price. You can transfer more than the price of a cheap airplane at once.

I agree there are times you shouldn't run an IPO and keep your company private, but I happen to think that if you time the IPO right and infuse your company with needed capital at an important time, it can be well worth it.

Unless facing compeition at early stage, I won't consider doing IPO for my main airline. But for subsidiary, that would help its growth