DD. Short TUI DD via /r/wallstreetbets #stocks #wallstreetbets #investing

DD. Short TUI DD

<non English so please be soft for my & Google translation>

TUI Group is a German leisure, travel and tourism company, one of the largest in the world. The business model of this company should be known, I'd to shortly DD finical side.

At Feb 2020, the price of TUI shares was over EUR 10, to drop and fluctuate at about 3 euro after Covid starts. The tourism industry has died down, i.e. TUI decided to take a government aid to survive. Founds been mainly taken from the Kreditanstalt fuer Wiederaufbau (KfW) bank, the German Economic Stabilization Fund (WSF), called alled "Silent partnership”. At June 2021, total debt was € 6.8 billion.

Initially, the plan was to pay off the loans created after Covid from the company's profits, but the protracted pandemic (omicron variant) and uncertainty about the possibility of a quick return of, in particular, airports to pre-pandemic turnover, resulted in the decision of the management of TUI issuing 162,291,441 new shares for the price EUR 2.62 per unit, which was 10% lower than the current market price. The company raised EUR 425 million and informed that it would use this amount to settle part of its debt. Analysts had assumed the possibility of increasing capital in this way long before. As a result, on June 30, the TUI group repaid the second tranche of the aid received in the form of various financial instruments, including state guarantees. It is 725 million euros, this is the amount returned to the Economic Stability Fund, including interest, and they also reduced the credit line from the Reconstruction Fund (KfW) from 2.4 billion to 2.1 billion. The previous tranches in the amount of 700 million TUI paid in April 2022.

Unfortunately, the issue of new shares, although it helped to pay off the debt, caused the share price to drop. This should come as no surprise as no investor likes to dilute stocks, especially if the capital of these shares is intended for repayment of liabilities. So why did I decide to buy a stake?

TUI has presented a plan to get out of its debt and is implementing it, unlike, for example, the British Rolls Royce, which in my opinion is in a worse position and the management is not able to come up with concrete steps to pay off its huge debts, in return we keep hearing about new plans development of the company (Construction of nuclear mini-reactors), which will certainly generate new costs. This shows that the company's financial policy may be different and short-sighted.

Finally, I would like to point out that the investment in TUI is still a high risk, but in my opinion a healthy financial policy deserves some confidence in the future, therefore I allocated 6% of my portfolio to the purchase of shares with an average purchase price of 1.645 and waiting for earnings report in 4 days 10.08.2022

This is not financial advice. I'm not financial advisor do not take anything in this post as financial advice


Submitted August 05, 2022 at 02:46AM by Unlucky_Ad_7742
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