Rosenberg Rejects Offers to Sell Stake in El Al Amid Soaring Valuation
Translated & summarized from Ice by baba
Kenny Rosenberg's investment in El Al, made in 2020 when the airline was near collapse, has become highly successful, with his family's stake now valued at $1.5 billion, a 6.6-fold return. Rosenberg has rejected offers to sell his shares, believing the company's potential is not fully realized. The airline has also seen significant financial and operational improvements, but faces increased competition as foreign carriers return, and consumers pay high ticket prices partly subsidized by state security funding.
The story in 6 lines · by baba
- Kenny Rosenberg's investment in El Al has yielded a 6.6-fold return, with his stake now valued at $1.5 billion.
- Rosenberg has rejected offers to sell his shares, believing El Al has significant future growth potential.
- El Al has transformed financially, moving from substantial debt to a $900 million surplus and $2 billion cash reserve.
- The Israeli state missed out on substantial profits by selling its El Al shares too early.
- High ticket prices are partly due to reduced competition and state-subsidized security, creating a consumer paradox.
- El Al faces future challenges as foreign airlines return and competition increases post-war.
Five years after acquiring a controlling stake in El Al during the height of the COVID-19 pandemic, Kenny Rosenberg's investment has yielded astronomical returns. In September 2020, with the airline facing collapse due to deep debt and operational challenges, Rosenberg, through his son Eli, purchased control for approximately 360 million shekels. Today, the Rosenberg family holds 42.25% of El Al's shares, valued at about $1.5 billion. After accounting for a $45 million dividend received in January, their net investment stands at roughly $230 million, representing a 6.6-fold return, according to a recent analysis by TheMarker.
Despite the stock's approximately 1,000% surge over the past five years, with the company now valued at around 10.6 billion shekels, Rosenberg has reportedly rejected offers from financial entities and investment firms seeking to purchase part of his stake. His family believes El Al's potential for further growth is not yet fully reflected in its current share price. Other stakeholders, including Board Chairman Amikam Ben Zvi and institutional investors like Clal Insurance and The Phoenix, have also seen significant profits.
The Israeli state, which bailed out El Al during the crisis and held 14% of its shares, missed out on substantial gains by selling its holdings too early. Had it retained them until now, the shares would be worth approximately 1.5 billion shekels for the public coffers.
Financially, El Al has undergone a remarkable transformation, tripling its operations on profitable transatlantic routes. The airline has shifted from a net debt of $1.4 billion to a financial surplus of $900 million, with a cash reserve of about $2 billion.
However, the airline's recent success is intertwined with the security situation post-October 7. The withdrawal of foreign airlines significantly reduced flight availability and competition, leading to substantial price increases. The State Comptroller noted that excess demand resulted in significantly higher ticket prices compared to the previous year. While Israelis are flying El Al partly due to a sense of security, the article points out a consumer paradox: the state heavily subsidizes the airline's aviation security, effectively allowing a private company to benefit from a competitive advantage funded by taxpayers, who then pay premium prices for tickets.
As foreign airlines gradually return, El Al faces the challenge of maintaining its market position after the war, when competition intensifies and the Israeli consumer is no longer a captive audience.
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