Norwegian Air hits record market value in logic-defying rally

Norwegian Air Shuttle ASA is facing its worst crisis ever and just went through a big restructuring, but the airline’s market value has never been higher.

In a three-day rally, the stock has jumped more than 72%, closing at level that’s even higher than before the registration this week of billions of new shares handed to creditors. That means the low-cost carrier’s market value is now at a record 13.7 billion kroner ($1.4 billion).

That’s despite the airline remaining highly indebted and having warned it will likely need to raise more capital as the entire industry struggles from the slump in demand triggered by the Covid-19 outbreak.

Although the share’s rise follows a broad advance by other European travel stocks as countries lift restrictions, it seems to defy all logic, said Robert Naess, the head of Nordea Investment Management in Norway.

“It doesn’t make any sense,” he said by phone. “The people buying the stock can’t have sat themselves down and done the math.”

Norwegian Air’s rally followed a steep drop on May 20, when the company announced the completion of a 13 billion-krone recapitalization that included the conversion of lease and bond debt and the sale of new shares. The equity issue was completed at 1 krone a share, which compares to Tuesday’s closing price of 4.475 kroner.

Funds managed by Nordea subscribed for 5 million of those new shares, but immediately sold them off at 2.2 krone apiece, Naess said.