Webjet managing director, chairman offload big share sales

The managing director of Webjet has sold down almost half his shares in the battling travel outfit in a $21 million deal.

The sales come only weeks after John Guscic talked up the potential for the pandemic-struck Melbourne-based business and played a straight bat to queries about loans tied to his shares.

Mr Guscic on Monday blamed the selldown of more than 5.5 million shares on settling a loan arrangement tied to the shares, pointing out he still had half his remaining stake and maintaining an "intent to remain a long-term shareholder".

"I … am encouraged by the significant opportunities for returning to profitable growth when COVID-19 subsides," he said in a statement.

Webjet chairman Roger Sharp's private family company sold almost one-fifth of the shares he holds for $249,000. That's the same amount that he stumped in during a recent $1.70 a share capital raising.

"I just took the capital I put in, off the table," Mr Sharp told The Australian Financial Review. He said he did not intend on selling more shares.

Mr Sharp said he "understood the optics" but the share sales were just "a sideshow" with the business looking at rebuilding in a tough environment.

Last month, Mr Guscic gave no indication of a selldown when he outlined a full-year loss of $143 million for Webjet, whose main business arms include a website allowing people to book airline tickets.

During an interview then with the Financial Review, he was coy about the loan arrangements surrounding his shares, saying only that it was a "structured finance arrangement" that had been in place for almost five years. The arrangement was a collar, which uses options.

No margin trigger

"It doesn't have a margin-price trigger in the loan," Mr Guscic said. That did not mean the borrowers did not care about the value of the equity, he said.

"That's a stretch," he said. "I'm not going into the ins and outs of a personal contract.

"I've disclosed I've had an arrangement with UBS. I also have a continuing arrangement with UBS, and I have another arrangement with Goldman Sachs with regards to my shares."

He rejected any comparison with margin calls hammering some executives during the global financial crisis causing large share selldowns. "If you look at the volatility – the share trading of our business – we're trading more than my shares on a daily basis. So it's not material to the volatility," he said.

"If I had 40 or 50 per cent of the stock, it's important. But I don't, I have a small number. I account for less than a day's trade. So it's not material. No investor's picked this up with me for many years."

On Monday, Webjet said the selldown of 5.5 million shares came because Mr Guscic would be settling funding arrangements with UBS "historically entered into for the purpose of acquiring Webjet shares when they were trading at a significant premium to the current share price".

"Given the significant impact COVID-19 has had on the global travel industry and value of the company's shares since acquisition, upon expiry of these funding arrangements Mr Guscic does not consider the cost of extending them to be appropriate," Webjet said.

Company accounts show Mr Guscic first received board permission in June 2016 to obtain funding from UBS to convert about 500,000 options for $1.49 million – an exercise price of about $2.98 each. Webjet shares at the time were worth $7.23 on an unadjusted basis, according to Morningstar records.

Subsequent loan deals have been referenced in director notices since then and Mr Sharp argued they offered a way for a high-conviction executive to acquire shares.

Smashed by the pandemic

Shares in Webjet – currently a top shortselling target – were trading up 5¢ at $3.86 on Monday.

The company's share price skyrocketed and was trading as high as $16.87 in 2019, but was smashed in the pandemic as borders shut down travel industries.

Webjet subsequently raised $346 million in equity at $1.70 a share then tapped funding markets for €100 million ($163 million) in a convertible note – a loan that can be converted into equity.

Mr Sharp said share sales were not discussed at the time of the raising but argued this was fair. "I just think at the time, who would have thought that a $1.70 capital raise would end up [near] $4" even with the pandemic worsening.

He said that the first the board knew of Mr Guscic's upcoming offload was last week when the managing director sought permission for the sales. Mr Sharp said Mr Guscic had also been unaware of the chairman's planned sale too.

Mr Guscic said last month that cash burn had been reduced to $10 million a month and predicted the company was well positioned in terms of liquidity over the next couple of years.

The company's presentation said Webjet was "well placed to benefit as domestic leisure markets open up".

Mr Guscic was only last month granted a potential new bonus program – it still requires shareholder approval – for 4.5 million options over three years.

The sole target is improving the company's share price, and the first two-years' worth of options are already in the money, being convertible at $3.39 a share and $3.73 a share, respectively.

The final batch of options are convertible at $4.11 a share. Mr Sharp said that a risk lay that the share price could come down.