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It’s been a challenging day for Webjet Ltd (ASX:WEB) as the company’s shares experience a sharp decline, in contrast to the broader S&P/ASX 200 Index, which is down 0.26% at the time of writing. After closing at AU$8.48 per share yesterday, Webjet’s stock opened slightly lower at AU$8.47 this morning but has since fallen significantly, trading at AU8.28, marking a 2.42% drop. This decline comes amid broader market struggles and seems particularly severe for Webjet compared to other travel stocks such as Corporate Travel Management Ltd (ASX:CTD) and Qantas Airways Ltd (ASX:QAN), which are also trading lower but not as drastically.
The sharp drop in Webjet's share price today can be attributed to the company's recent announcement concerning its proposed demerger. This morning, Webjet filed an update with the ASX detailing progress on its plan to separate its two major travel divisions.
The demerger, first suggested during Webjet's full-year earnings announcement in May, involves spinning off its business-to-consumer (B2C) operations—including Webjet OTA, GoSee, and Trip Ninja—into a new entity. The remaining Webjet entity would retain the business-to-business (B2B) 'WebBeds' division. This strategic move aims to enhance value by allowing each division to focus on its core market and growth opportunities.
In June, the company further indicated its belief in the value of this separation, stating that it saw "significant value enhancement" through the split of its leading businesses and brands. Today’s update confirms that Webjet is advancing with the demerger, scheduling an extraordinary general meeting (EGM) of shareholders for September 17 to vote on the final plans.
According to the announcement, Webjet will distribute a 'demerger dividend' to its shareholders, providing new B2C shares on a one-for-one basis. This means that existing shareholders will receive shares in both the newly formed B2C entity and the rebranded Webjet, which will be renamed 'WEB Travel Group Limited.'
The board has unanimously recommended that shareholders approve the demerger. However, the significant drop in Webjet’s share price today suggests that there may be some skepticism among investors about the proposal or its execution. This market reaction highlights concerns or uncertainties regarding the benefits or implications of the split.
