Should You Invest in Virgin’s New IPO?

The return of Virgin Australia to the ASX is one of the most anticipated IPOs of 2025. With Bain Capital reducing its stake and Qatar Airways retaining its significant shareholding, Virgin is set to list at $2.90 per share, valuing the company at $2.32 billion. But should you jump on board?

Are IPOs a good investment?

Historically, IPOs offer a poor risk-reward ratio. Our data suggests that 50 per cent of IPOs trade lower within their first year. Virgin’s own track record isn't encouraging. When it originally listed in December 2003 at $2.06, the stock plummeted 40 per cent by 2005. It briefly recovered to around 10 per cent of its original value by 2007 before crashing over 90 per cent and being delisted in 2020. If you had analysed a chart back then, the red flags were evident, underscoring the importance of technical analysis in avoiding poorly performing stocks.

This is why we emphasise chart analysis when teaching our students to trade. A minimum of five years of data is crucial for understanding market sentiment and price movements. IPOs, by their very nature, lack historical data, leaving investors to speculate rather than analyse. While Virgin’s prior performance in the market offers some hindsight, a strong performance in this new iteration is far from guaranteed.

Is it better to wait for confirmation of the stock’s performance?

It’s worth noting, however, that Virgin has made significant strides since its collapse during the pandemic, reporting profits in FY2023 and FY2024. Its streamlined operations and partnership with Qatar Airways may offer a more sustainable business model. However, the airline industry is inherently volatile, and Virgin’s competitive position relative to Qantas remains challenging.

For those considering investing, I recommend waiting for confirmation rather than speculating on the IPO. Allow the stock to establish a trading history before making a move. This way, you can analyse its behaviour and assess whether it aligns with your investment strategy. History has shown that patience pays off when it comes to IPOs.

That said, Virgin’s return to the ASX is a positive sign for the Australian market, signalling renewed investor confidence. While I’ll sit this one out, I’m keen to see how Virgin performs and whether it can defy its historical trends. For now, I’ll stick to analysing charts over betting on an IPO.

What were the best and worst-performing sectors last week?

The best-performing sectors included Financials, up 1.95 per cent followed by Energy, up 1.77 per cent and Real Estate up 1.42 per cent. The worst performing sectors included Healthcare, down 1.53 per cent followed by Utilities, down 0.52 per cent and Consumer Staples, down 0.04 per cent. 

The best performing stocks in the ASX top 100 included Lynas Rare Earths up over 15.97 per cent followed by James Hardie up over 13.04 per cent and Washington H Soul Pattersons up 8.53 per cent. The worst-performing stocks included IDP Education, down over 53.97 per cent followed by Light and Wonder, down over 8.10 per cent and Treasury Wine Estates down over 3.91 per cent.

What's next for the Australian stock market?

The All-Ordinaries Index extended its winning streak with another strong performance this week, gaining just over 1 per cent. The rally was driven by gains in the financial and energy sectors, with materials also contributing. Having our largest sectors, financials and materials, moving higher together only adds to the bullish sentiment in the market.

What stands out is the market’s resilience despite mixed economic signals. Reports of Australia entering another per capita recession and the prospect of more interest rate cuts might seem like reasons for caution. However, while rate cuts typically support the market, they also hint at deeper economic challenges.

This week’s clean break above 8,600 marked a pivotal shift for the index. What was once a major barrier has now turned into a crucial support level. With the market sitting just 1.2 per cent below its pre-Trump tariff all-time high, it highlights one of the sharpest and most remarkable recoveries on record.

To put it in perspective, the market has climbed over 19 per cent in just two months, which is a staggering turnaround compared to the average annual return of 13 per cent since 1900, according to Market Index. With such a sharp ascent, the risk of a pullback is rising. Whether the market pauses just shy of its all-time high or breaks through first, a short-term correction could be on the cards.

Markets often take a breather after a strong run, and a period of consolidation might set the stage for the next move higher. For those that have been waiting on the sidelines, a pullback could present more favourable opportunities in the weeks ahead.

For now, good luck and good trading.

Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of the bestselling and award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online.