What will happen to Rex shareholders? Will they get any money back?

Since the end of July, Rex shareholders have been unable to buy and sell shares, owing to their company being in administration and suspended from trading on the ASX. What will happen to them? That’ll depend on what becomes of Rex, and whether or not it resumes trading. Rex could well have a future, but it may not involve being publicly listed.

What may become of Rex?

What will happen to Rex will be up to what the administrators find is the best path forward. It is unlikely anyone will want to buy the whole business simply because of the ageing Saab fleet. Virtually no parts are available anymore because it is not produced, and so half the fleet is out of service anywhere. What’s the point in government subsidies to fly routes if you don’t have the aircraft to fly them with? And if you needed to buy a fleet of planes, where would you obtain those planes and the finance for them? And how long before a return could be made?

However, certain parts of the business may be bought individually, with FIFO charter airline Pel Air being on positive part of the business. Certain routes may be taken over by other airlines – for instance Queensland-based carrier Skytrans might been rumoured as one that could take over Rex’s Northern Queensland routes. We’d imagine QantasLink in WA could take over routes in the West. Ultimately, we are just speculating here, and only time will tell.

Even if the whole business survives, we’d find it difficult to imagine the new management would want to retain the ASX listing, given the high listing fees and scepticism toward airline stocks generally, not to mention the share price performance of Rex since the pandemic. We won’t say it would never return the ASX boards – it could be bought by a private equity buyer who wants to cash out, and this is the only reason Virgin Australia could be relisted.

But in such an event, it would be a new company – existing shareholders would likely be wiped out. The saving grace is that the old management would having nothing to do with the company – in fact, the board were all booted when the company went into administration.

What’ll happen to Rex shareholders if Rex is delisted?

Unfortunately, just as happened with Virgin Australia when it went into administration during COVID and ended up getting bought by Bain, they may get nothing. As unsecured creditors, they’ll be right behind secured creditors (i.e. debt holders) in the queue for anything. Nonetheless, as we outlined here, investors have some options to minimise the harm, particularly claiming Rex shares as a capital loss and thus minimising taxes on capital gains (if any).

One highlighted solution is Delisted Australia, that purports to buy ‘worthless shares’. You could sell shares to them for nothing, then use that as the CGT event for disposing of your shares and thus formally realising a capital loss. You have to pay a fee for this service, although this may be tax deductible.

Don’t discount the possibility that there could be legal action in the future, especially if the corporate regulator finds anything illegal such as insolvent trading.

Conclusion

Rex investors can only sit back and twiddle their thumbs until something is announced for sure. All we can do at this stage is speculate, although we think it is more than fair to assume that even if the entire business survives (sans the 737 jet operation) it’ll be listed on the ASX going forward.

Nonetheless, this is another case story of why airlines can be such toxic investments – even if they are not mismanaged. They are high-capex and low-margin businesses.

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