KUALA LUMPUR (Oct 23): AirAsia X Bhd (AAX) shares slipped to below RM2 on Monday after an application to uplift its Practice Note 17 (PN17) status was rejected by Bursa Securities.

The medium-haul low-cost carrier, the fifth top loser on Bursa Malaysia on Monday, closed at an intraday low of RM1.83 — its lowest since July — after falling as much as 18 sen or 8.96%.

About 8.2 million shares changed hands, close to its 200-day average volume of 7.95 million.

At RM1.83, the stock had a market capitalisation of RM818 million.

AAX shares have been on a downtrend, having fallen 29% or 74 sen cumulatively since hitting their nearly five-year peak of RM2.57 on Sept 13. Some RM331 million in market capitalisation has evaporated from AAX during the same period.

Its sister company Capital A Bhd was also bogged down by the news, as its shares hit an intraday low of 80 sen — their lowest level since early July — after dropping as much 5.33% or 4.5 sen.

At the closing bell, the stock was down three sen or 3.55% at 81.5 sen, bringing it a market capitalisation of RM3.43 billion.

Year to date, AAX has gained 205% from when it was trading at 60 sen, while Capital A shares are up 26% from 64.5 sen.

AAX slipped into PN17 status in October 2021, while Capital A did so in January 2022, after accumulating Covid-19 pandemic-led losses, which resulted in negative shareholder equity for both companies.

To recap, AAX suffered a setback last Thursday in its attempt to get itself uplifted from its Practice Note 17 (PN17) status.

Bursa, however, has granted AAX an extension of time until Jan 17 next year to submit its regularisation plan to the regulatory authorities, as the latest extension is due to expire on Oct 28. AAX had been granted an extension to submit its regularisation plan on two occasions, first for six months to April 28, and then for a further three months until July 28.

The reason for Bursa’s rejection was not disclosed, and analysts believe that the rejection of AAX’s application has cast doubt on the feasibility of the proposed acquisition of Capital A's aviation business.

Analysts contacted by The Edge pointed out that the acquisition would not resolve the PN17 status for either company, as AAX would still be considered a financially distressed entity. This could make it difficult for the combined company to meet the listing requirements of Bursa.

As a result, the proposed acquisition may now be seen as a less attractive option for both companies. Capital A may be reluctant to proceed with the deal if it does not lead to the upliftment of AAX from PN17 status. AAX, on the other hand, may find it difficult to secure the necessary financing for the acquisition if it remains under PN17 status.

Analysts believe there is a possibility that the proposed acquisition could be scrapped entirely, or alternatively, the terms could be renegotiated with AAX or even other parties.

Both Capital A and AAX share common shareholders — Capital A co-founders Tan Sri Tony Fernandes and Datuk Kamarudin Meranun.

The top shareholders of AAX are Kamarudin, who holds an 8.94% direct stake, and Fernandes, who holds a 2.69% direct stake, as well as an indirect stake of 31.59% through Tune Group Sdn Bhd (17.83%) and AirAsia Bhd (13.76%). Both Kamarudin and Fernandes also hold an indirect stake of 24.61% in Capital A through Tune Live Sdn Bhd (12.23%) and Tune Air Sdn Bhd (12.4%).

Meanwhile, Fernandes posted on social media platforms that his vision for the airline business continues unabated despite facing opposition from "haters and regulatory hurdles".

“To all the armchair critics and haters, have a read. I am the man in the arena who will never give up on his dreams or to build a culture that breaks the norm like having female pilots or giving the chance to a despatch boy to become a captain.

“The dream continues despite those who hate, regulators who look to hurt as opposed to help, and external factors such as Covid,” Fernandes said in a LinkedIn post on Sunday.

Despite facing obstacles from regulators, Fernandes said he would remain undeterred in his pursuit of positives.

“Keep smiling always and there is never a negative, only positives. Nothing get me down and there are positives in everything,” he said.

Fernandes is also thankful for his staff being supportive of him and pushing him forward with his dream and the mission to disrupt norms. “Allstars” is a term he used to describe AirAsia employees.

“Love the below and love what happened last week. Drive me even harder to succeed and continue to disrupt and give the common man a chance.

Most of all I thank all my Allstars for their undying support and love. They know the man in the arena and what he stands for and how he helped change many people's lives,” he said.

Read also:
Bursa Securities rejects AirAsia X's application for relief, PN17 upliftment
AirAsia X's PN17 rejection casts doubt on acquisition of Capital A's aviation business — analysts
Anticipation builds for divestment of Capital A’s aviation business; analysts expect valuation of below RM5 bil
AirAsia X submits application to exit PN17, confirms The Edge report
AAX slumps after Bursa rejects its application for relief, PN17 upliftment