MIAMI — The NASDAQ stock exchange is reporting that Virgin Trains USA’s initial public offering of common stock is set for Wednesday, Feb. 13. The offering is part of the partnership between Virgin Group and Florida’s Brightline announced last November [see “Virgin Trains-Brightline partnership leads to public offering,” Trains News Wire, Nov. 18, 2018].
The “Upcoming IPOs” portion of NASDAQ’s website says shares are pegged to open between $17 and $19 under the symbol “VTUS.” The company expects to offer 28.334 million shares, which NASDAQ says translates to an offer amount of up to $619.1 million. Money from the stock sale would provide only part of the nearly $2 billion for the expansion of service to Orlando, Fla. That project requires an upgrade of Florida East Coast Railway tracks to 110 mph from West Pam Beach to Cocoa, Fla., and a new 125-mph “sealed corridor” segment west of Cocoa to Orlando International Airport.
Virgin Trains USA’s Securities and Exchange Commission filing reveals that the company is “in discussions with potential lenders, other potential financing sources, and advisors regarding a debt financing of up to $2.3 billion … to complete the construction of the North Segment and other uses.” These include land acquisition and construction expenses for proposed Orlando-Tampa and Las Vegas, Nev., to Victorville, Calif., extensions; Brightline-to-Virgin rebranding expenses; purchasing more rolling stock from Siemens; and investing in additional signaling and positive train control upgrades to the now-operating Miami-West Palm Beach portion of the route.
The company also has until May 31, 2019 to sell $1.15 billion in tax-exempt “private activity” bonds, allowed after a U.S. District Court ruled against Indian River County’s attempt to block the sale. [see “Court throws out latest suit by county opposing Brightline expansion,” Trains News Wire, Dec. 28, 2018.]
Indian River County not only is appealing that ruling, but on Jan. 16 filed another lawsuit claiming that it should not have to continue paying for highway crossing maintenance because its decades-long maintenance agreements are technically with Florida East Coast Railway, and Virgin Trains/Brightline cannot be considered a third-party beneficiary. The TC Palm newspaper website reports crossing maintenance has averaged $235,000 annually since 2011, but attorney Dylan Reingold says those fees could rise with higher-speed trains and taxpayers will be on the hook.
These legal actions will add to the $8 million of public money that two Florida counties and an advocacy organization have already spent trying to fight Brightline. While Indian River refuses to negotiate infrastructure improvements and other mitigations, the other two entities, Martin County and Citizens Against Rail Expansion (“CARE Florida”) reached agreements with the passenger operator that prompted them to drop further litigation.
Meanwhile, Florida Development Finance corporation reports for fourth quarter 2018, the first in which the company had ramped up frequencies between West Palm Beach and Miami, reveal that the company carried 238,749 passengers on revenue of $4.7 million. The totals increased from about 60,000 travelers in October to 98,000 in December, while monthly revenue more than doubled over the period.
First of all, the FEC rails are owned by Ferromex, not Brightline.
Brightline only has contractual rights to operate trains on the FEC right of way, FEC has a contractual obligation to maintain them as part of the agreement.
So Indian River will lose (again). They could have paid for the crossings already with the legal bills they are accumulating.
I like it better than your usual disclaimer!
$17/share strikes me as awfully high.
Softbank paid $8.08 per share ($3.4 Billion) when it acquired Fortress Investment Group (FIG) in February 2017:
https://www.bloomberg.com/news/articles/2017-02-14/fortress-shares-jump-27-on-report-softbank-nearing-buyout
When they bought FIG for $3.4 Billion, Softbank got Brightline, Florida East Coast Railway and a bunch of other stuff. They then sold FEC for $2.1 billion in March 2017:
https://www.jaxdailyrecord.com/article/florida-east-coast-railway-sold-mexican-transportation-company
We might speculate on a few shares of this. Ms. Harding, really liked the Old English! (Perhaps your usual disclaimer should be in OE!)
Oops…sorry. Not what I though I had loaded in cut and paste…
I wish it would be possible to get anywhere near this IPO at the offering price. Unfortunately that is not the way things work in the corporate world. It will go to institutional bidders and by the time it gets down to the level where I can access these shares they will go for probably a hundred dollars a pop. Such is capitalism…
Her wæron reðe forebecna cumene ofer Norðhymbra land, ? þæt folc earmlic bregdon, þæt wæron ormete þodenas ? ligrescas, ? fyrenne dracan wæron gesewene on þam lifte fleogende. Þam tacnum sona fyligde mycel hunger, ? litel æfter þam, þæs ilcan geares on .vi. Idus Ianuarii, earmlice hæþenra manna hergunc adilegode Godes cyrican in Lindisfarnaee þurh hreaflac ? mansliht.
In this year fierce, foreboding omens came over the land of the Northumbrians, and the wretched people shook; there were excessive whirlwinds, lightning, and fiery dragons were seen flying in the sky. These signs were followed by great famine, and a little after those, that same year on 6th ides of January, the ravaging of wretched heathen men destroyed God’s church at Lindisfarne.
Mr. Parker: You are correct about valuation. However, the prospectus (page 50) talks about dilution. The stock market itself will set the actual value of a share. However, the amount of actual assets available to the company after the stock offering would only account for a value of $7.91, assuming an offering price of $18 per share.
Mr. Pins: Pages 20-46 of the prospectus go into great detail about potential problems associated with financing, contractor performance, regulatory approvals, and the like. Follow the link. https://www.morganstanleyclientserv.com/cs/documents?DocID=r_VTUS1
Jim Norton,
The Virgin Group name is synonymous with the travelling public for excellent customer service, friendly personnel and an overall great value. It does wonderfully as Virgin Atlantic, Virgin Australia, Virgin Trains(in the UK)…and was doing good enough as Virgin America to piss off Richard Branson when they decided to sell the airline to the Alaska Air Group. Not really sure why you think it’s hideous, or blanket statements that reflect your opinion, if it’s your opinion common courtesy is to at least mention that somewhere in what you write or say.
Amount per share is not the key number – the total valuation is what matters.
Mr. Shigley – Could you expand on the “very substantial potential roadblocks to success” that are outlined?
I’ve read the prospectus. First, it states that the book value of the corporation will be $9-$10 per share, a lot less than the IPO asking price. Second, they are looking at not being substantially developed until 2024-2025. Third, they have outlined very substantial potential roadblocks to success. Fourth, except for their legal counsel, no one in senior management and their non-executive managers has a railroad background (mostly entertainment and real estate). Fifth, their annual traffic projections for the Las Vegas route equates to almost 31,000 per day 365 days per year (or an 8 car Select Brightline set fully loaded running every half hour 7AM through 9PM from both end points). Thus, although I hope the company succeeds, I think Anna’s projection of $100 per share stock is a bit optimistic.
An average of just over per passenger? It’s difficult to make money at that rate.
Virgin Trains is a hideous name.