Virgin Trains USA Inc., which carries passengers between Miami and West Palm Beach and has signed a licensing agreement with billionaire Richard Branson, has sought to mobilize up to $ 538 million under a contract. IPO announced Tuesday. Instead, the company plans to work on alternative financing and return to the stock market at a later date, said the person, who asked not to be identified because the decision has not yet been made public.
Ben Porritt, a spokesman for Virgin Trains, did not have an immediate comment on the state of the IPO.
The offer, which would have earned the company up to $ 3.15 billion, was expected at a price below the market price range of 17 to 19 dollars per share, said Monday a person familiar with the matter.
The company planned to use the funds raised to expand its luxury high-speed passenger service to Orlando, the seat of Disney World. It is also planned to begin the service linking Southern California to Las Vegas. These extensions could help increase the annual number of passengers 37 times, reaching 20.8 million passengers in the next five years, the company said in its IPO.
The postponement of Tuesday's IPO follows previous delays for Virgin Trains. Last year, the company, owned by the private equity firm Fortress Investment Group, had to postpone start-up dates along the Florida corridor and thus halved its forecast for passenger numbers, Losing $ 87.1 million on a business turnover of $ 5.2 million in the first nine months.
The IPO was seen as a test for a new listing market already upset by worried investors worried about the continuation of the trade war with China and the specter of the US government's closure if President Donald Trump and Congress did not sign a new spending agreement before Friday's deadline.
In fact, the five IPOs in the United States in January raised $ 353 million, the worst month since January 2016.
Virgin Trains was also facing skepticism.
Josef Schuster, founder of Chicago-based Ipox Schuster LLC, said before the postponement that, according to him, the targeted valuation of Virgin Trains, based on the sale of 17% of the company's stock, was too high for such a company. speculative investment.
"It's a great concept, but I think at the beginning, shareholders will struggle to make money from this deal," said Schuster, whose firm oversees about $ 1.7 billion invested in the recent IPOs.
Virgin Trains – known as Brightline before its brand deal with Branson in November – estimates that Disney's tourist transportation is more lucrative than its current route. According to a Louis Berger study commissioned by the railroad, it will generate three times more revenue on the Orlando race than on the short routes between Miami, Fort Lauderdale and West Palm Beach.
Overall, Virgin Trains expects its Florida travelers to pay an average of $ 73 per salon by 2023 or early 2024, while consuming food and merchandise as well as paid advertising.
Virgin Trains has obtained all major permits, real estate rights and track rights for the Orlando Extension. Construction is underway and should be completed in three years. Still, he needed an additional $ 1.9 billion in addition to the expected IPO proceeds and was planning to fund up to $ 2.3 billion in debt financing for 2019, according to the reports. reports filed by regulatory authorities.
Tampa, Las Vegas
The extension of service between Orlando and Tampa, Florida, and the link between Las Vegas and Victorville, California, will cost $ 5.3 billion more. Virgin Trains announced in September that it had agreed to buy DesertXpress Enterprises LLC for $ 120 million, which would give it rights to develop the Las Vegas-Southern California corridor. She also acquired 38 acres for a resort and a versatile development next to the Las Vegas Strip for $ 150 million.
Train travel is nostalgic in Florida, although residents rarely use it. In the 1890s, Henry Flagler, founder of Standard Oil, whose family name consisted of road signs, schools and subdivisions, built a railroad that transformed the peninsula, many of which were considered improper to human colonization. Virgin Trains is now trying to revive this route.
In the long term, the company could move its high-speed 125 km / h trains to other US markets that meet its basic criteria: essentially key population centers about 200 to 300 miles apart.
Following the IPO and a related private placement, an entity associated with Branson's Virgin Group reportedly held less than 2% of Virgin Trains' capital, based on regulatory filings. Fortress funds planned to hold approximately 82% of their assets through their AAF Holdings entity. The impact of the late IPO on Branson's interest was not immediately obvious.
To succeed, Virgin Trains has to convince more Americans to get out of their vehicles, especially in a state of automotive culture like Florida. According to Louis Berger's report, by 2023, the company will make 9.9% of all travel between Orlando and Southeast Florida, with car trips keeping the lion's share of the rest.
This forecast assumes that passengers prefer to spend about three hours and fifteen minutes on a train with wireless Internet access and refreshments rather than four hours by car. The National Railroad Passenger Corp., better known as Amtrak, already offers two daily connections between Orlando and Southeast Florida. Virgin Trains said it would differentiate itself by offering more departures and reducing Orlando-Miami commute times by more than two hours.
Monday's passengers at Miami's flawless train station – still featuring the old Brightline logo – included commuters, students and out-of-town travelers.
Zachary Potter, a 43-year-old family lawyer based in Palm Beach, said the train had already allowed him to take more cases in Miami. It is able to perform work downhill and downhill while avoiding delays on highways.
"It's clean, it's at the moment, it's not crowded, and you're avoiding all the traffic in Miami," he said while going to the train. Is wonderful. "
Virgin Trains must achieve its operating profit target of 70% – before amortization – which would be higher than the other four passenger rail systems cited in the Initial Public Offering document. The projection, based on another independent study by Louis Berger, estimated revenues and costs from labor, fuel and other overheads. Virgin Trains is unique in having its rail corridor and infrastructure.
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