They actually have spun it favorably. The financial instrument changed, therefore they had to do a fair value assesment according to Quebec financial rules. They used that as leverage to move the Airbus buyback date to 2026. The strategy here is since Airbus projects program to be cashflow positive in 2025 once 150 per year rate is obtained, the value should therefore be a lot better, and IQ should recoup the "on paper" loss.
I'm having a hard time seeing what leverage a passive investor in an overvalued asset would have.
It's kind of interesting how these lower levels of valuation support the controversial points BBD was making when this thread was started, that the program will require more investment than planned, will take longer to break even than planned, and will have overall lower ROI than planned.
People seem to reflexively deflect negative news when it comes to A220.
Given Airbus's recent run ins with compliance issues I doubt they are going to be party to playing fast and loose with the truth so I think the valuations are solid.
Since it went down already by 46%, what else is there to loose?
54%? Doubling down on a bad bet is always a risky proposition. The program has to triple its current production rate while lowering costs to get to the projected 2025 break even point. A lot can happen between then and now, and it won't be in Airbus's best interest to have the program be hugely valued in 2026 when the buy out clauses kick in.
Program is more secure with Bombardier out of the picture right now anyways.
Yes, BBD was way over committed, but again they were on the hook to provide $700M in funding that Airbus now has to provide.
At this point, people are more angry at BBD management than at IQ.
The time for that was several years ago when they were trying to do three new airplanes at once.
In layman's terms to summarize, Airbus initially paid $1 for 51% of the program and has now paid about $600 million to increase that to 75%. IQ's valuation of its now 25% having being written down is valued at $700 million with the put on its shares deferred to 2026. If I'm understanding this correctly, the overall value of the program as it stands today is $2.8 billion? This essentially means Airbus has paid 25% of the value of the program for 75% control, not a bad investment.
I think the 50.01% for $1 is hard to evaluate since it included so many other things such as use of Airbus's brand which is a strong but intangible value, access to its marketing, supply chain and support organizations, the Mobile strategy and infrastructure, etc. I think the value of goods and services would exceed the $700M mark by a lot so I don't think we can say Airbus only provided 25% of the valuation.
I agree with the CAD 2.8B valuation based on QI's requirement to report fair value to the markets.
I still don't see why IQ was bumped up to 25% ownership for free and was given a more advantageous buy out date, unless it was a concession needed to make the politics work.
It makes me wonder if Airbus might harbor lingering resentment over giving up so much additional value for nothing in return.