ATLANTA -- Delta Air Lines Inc.'s new shares began their first trading day on the New York Stock Exchange on Thursday at a price below the company's initial projection.
Delta's chief financial officer said he was pleased with the carrier having the second-highest market capitalization in the industry, even as one analyst predicted that ranking would be short-lived.
The Atlanta-based company's shares opened their first public trading day since Delta exited bankruptcy on Monday at $21.75. That pegged Delta's initial market value at $8.7 billion based on the 400 million shares Delta planned to issue. All of those shares were outstanding, but as of Thursday afternoon about 150 million shares had not been issued because of unresolved claims with creditors, a Delta spokesman said.
Delta shares fell from the opening trade to finish the day at $20.72, dropping Delta's market value to $8.3 billion.
The company's shares were being traded under its familiar DAL ticker symbol.
The initial market value was short of the $9.4 billion to $12 billion that Delta had projected in its reorganization plan that it would be worth when it emerged from bankruptcy.
The opening stock price was also short of the $9.8 billion that Tempe, Ariz.-based US Airways Group Inc. had offered to buy Delta for before the hostile takeover bid was defeated in January.
But Delta CFO Ed Bastian said he was excited about Delta's prospects, especially considering that its market value is second-highest in the airline industry. Dallas-based Southwest Airlines Co. has the highest at $11.3 billion.
"That's an affirmation of the job we've done," Bastian said.
He also said that Delta's projected value in its reorganization plan was based on factors last fall. Bastian said things have changed in the airline sector since then.
Even so, one analyst at Prudential Equity Group, Bob McAdoo, said in a research note Thursday that Delta's stock is overvalued and trading at levels, in comparison to its peers, that are unsustainable. His firm initiated an underweight rating on Delta's new stock and a $14 price target.
"We will review our rating once Delta's valuation is more consistent with the other legacy carriers," McAdoo wrote.
Thursday was the first public trading day for Delta's new stock, but some creditors and others have been buying and selling shares in recent days on a when-issued basis, driving down the opening value. Bastian said stock price comparisons wouldn't be meaningful until the close of trading Thursday.
Delta exited bankruptcy on Monday after a 19 1/2-month reorganization that saw it shed billions in costs. Its previous shares were canceled when it left bankruptcy.
Delta entered Chapter 11 on Sept. 14, 2005, amid high fuel prices and the burdens of high labor and pension expenses. Delta significantly reduced its labor and pension costs while under court protection.
Chief Executive Gerald Grinstein, who bought 1,000 shares of new Delta stock Thursday at $21.75 a share, pressed a button to ring the closing bell from the floor of the NYSE. He then banged a gavel to signal the end of the session.
The company made the initial distribution of its new common stock to unsecured creditors with allowed claims. As part of its previously announced comprehensive compensation program, Delta also made its distribution of new common stock to approximately 39,000 noncontract employees.
Prior to the opening of public trading Thursday, the total equity stake the non-contract employees were to get had an estimated value of $350 million. Delta also said it planned to give 1,200 management employees an equity stake previously valued at $240 million.
Based on Delta's stock performance Thursday, Bastian's and Chief Operating Officer James Whitehurst's equity awards of 184,800 shares each were valued at $3.8 million. Grinstein declined all management equity awards. The canceling of Delta's previous stock also meant that 28,252 shares Grinstein was holding at the time were reduced to zero, a regulatory filing shows.
The stock awards for non-contract employees can be cashed out immediately, while the awards for managers vest over time. Also, some pieces of the management awards will require Delta to meet specific performance goals for them to have any value.
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