AerSale's shares face a downward trend today.
**AerSale Faces Potential Stock Price and Market Volatility Due to Secondary Offering and Leonard Green's Sell-Down**
AerSale, the aviation services company specialising in the sale, lease, and exchange of used aircraft, engines, and components, faced a secondary offering of 4 million shares on Wednesday, priced at $15.15. This offering, led by current holders including affiliates of Leonard Green & Partners, has raised concerns about the company's stock price and market volatility.
The secondary offering comes at a time when Leonard Green & Partners, a private equity firm that owned AerSale from 2010 until its public offering, is beginning to monetise its stake. This sell-down is expected to have a notable impact on AerSale’s stock price and market volatility, primarily due to the increased supply of shares in the market.
When a major shareholder sells a substantial stake, it can create a selling overhang—an excess supply of shares—which typically puts downward pressure on the stock price as the market absorbs the additional supply. AerSale has taken proactive steps to mitigate this impact, recently negotiating a deal to buy $45 million of shares at a discounted price to help "alleviate that overhang."
Large stake reductions by institutional investors often lead to increased short-term volatility because the market tries to price the new supply, and trading volumes can spike. This volatility might be exacerbated if there is uncertainty about the pace or size of Leonard Green’s future sales.
However, AerSale's strategic growth and proactive measures could partially offset these effects. The company expects to outperform 2024 results with strong inventory and expansion opportunities. Additionally, AerSale's efforts to manage the sell-down impact (e.g., share buybacks or purchasing shares at a discount) can reduce volatility and support the share price.
Investors should brace themselves for further volatility due to potential future secondary offerings of AerSale shares. As of April, Leonard Green & Partners held 34.3% of shares in AerSale and controlled two board seats. The firm is expected to continue selling down its stake in the future.
It's important to note that the secondary offering says little about what the company thinks of its own prospects. For long-term holders, the company's performance, not the addition of new shares to the market, will drive future performance.
The secondary offering of AerSale shares puts additional pressure on the stock, potentially leading to further volatility. Until the overhang of Leonard Green's stake in AerSale is gone, secondary offerings could continue to impact the stock's trading patterns.
[1] Source: Company press release and investor presentations.
AerSale's secondary offering and Leonard Green's sell-down could potentially influence the company's stock price and market volatility, as the increased supply of shares may lead to selling overhang, putting downward pressure on the stock price. Furthermore, technology, such as advanced financial analysis, might be utilized by investors tomake informed decisions about AerSale's shares, considering the potential for increased volatility.
