Avation Post-Mortem with Jeremy Raper $AVAP

Summary

• Jeremy Raper’s Avation (AVAP, London-listed) activist trade is now fully closed and publicly filed: he bought a hedge fund’s ~20% block at 79p in late September/early October 2023 — roughly a 25% discount to the ~100-105p last trade, against tangible book of 140-145p — and exited at an average of roughly 150p, with the final tranche sold back to the company at 138p on November 5, 2025. Andrew calls it “one of the best… activism ideas I’ve ever seen” because the block was the only way to capture the discount at size, and 20% bought “a voice in the room.”
• The sourcing story is a genuine one-off: Jeremy tweeted “does anyone know anyone at this hedge fund?” and the fund’s manager called him directly roughly 24 hours later. The seller was a small fund winding down that appeared to want out of an illiquid ~20% stake; Jeremy also already knew Avation’s executive chairman (who owned ~14-15%) socially from Singapore, so “it wasn’t a cold call.” The setup also involved a potential conflict between the fund’s shorter-term value objective and the founder’s desire to run the company his way.
• The macro backdrop was Jeremy’s two-decade conviction that aircraft lessors are structurally mispriced: he recalls AerCap at 0.6x book generating ~15% returns on tangible assets while banks traded at 2-3x book — “finance theory 101” says no discount to book when returns exceed cost of equity — and AerCap has since rerated, so “we’ve been vindicated over the long run.” Avation was the extreme case: about $100M market cap, ~30-33 planes, “junkier” regional jets, and >20% asset concentration to Virgin Australia, which went under during COVID.
• The biggest general learning was that activism behind the curtain is “an order of magnitude more involved than I had anticipated” — jobs attached to assets, competing personalities, and structural surprises like the tax treatment of piecemeal asset sales by a UK PLC versus a whole-company takeover, which can be quite different. Andrew made the order-of-magnitude point; he said the tax nuance was a contributing factor in why the intended endgame — selling Avation into a larger, lower-cost-of-capital balance sheet — never closed, “which is why you need the discount on the way in.”
• The capital-allocation core of the campaign: Jeremy argued against putting more capital into aircraft purchase rights (e.g., using illustrative numbers, $40M of deposits on 20 planes) while the equity trades at 50 cents on the dollar — “the market is directly punishing you for making a new investment… That’s the market telling you what to do.” In practice they monetized some purchase rights, refinanced debt, bought bonds back below par, and bought back shares.
• The exit logic is instructive: aircraft values rose ~25% over the two years and were partly monetized via asset sales, so the risk-reward “in the 140s and 150s is quite different” than it was at 80 — Jeremy scores the operational campaign “six or seven out of 10” and said he thought a whole-company sale would ultimately go in that direction because “the logic is largely irrefutable.” Andrew cites Bill Ackman’s claim that stocks his firm sold outperformed the S&P for three years afterward: trying to sell at the absolute top can make future exits harder. “It’s kind of someone else’s bet now.”

Deep dive

1. Aircraft leasing is finance-theory-101 mispriced — and Avation was the oddball of an already odd sector

• Jeremy’s setup: over two decades, developed-market investors could only access six or seven listed lessors — today “maybe three or four” — yet even multi-billion-cap names with 10-15 analysts traded at “crazy discounts to intrinsic value.” His old VIC post on AerCap captures the rant: 0.6x book with ~15% return on tangible assets while banks sat at 2-3x book — “finance theory says you should not trade at a discount to book value if your long-term returns on that book value are wildly above your cost of equity capital.” AerCap has since rerated: “we’ve been vindicated over the long run.”
• Avation was an oddball even by lessor standards: Singapore-based, London-listed, about $100M market cap, only 30-33 planes, mostly regional jets — “a bit more junky than your typical narrow bodies,” with more volatile usage rates and perhaps more OEMs. Over 20% of its assets were out with Virgin Australia, which went under during COVID — “not their fault necessarily… it was pretty capricious in COVID which airlines survived” — but “when you’re overly concentrated, you get buffeted by the vicissitudes of chance.”

2. The bat-signal block trade: 79p against 140-145p of tangible book

• The register showed a ~20% holder — a small hedge fund winding down and selling other positions — that appeared to want out of its illiquid stake. Jeremy’s sourcing method: “I literally put out on Twitter, does anyone know anyone at this hedge fund?… 24 hours later, I get a call… ‘Hi, I’m the manager of this fund.’” “It was like sending out a bat signal.”
• The block printed at 79p versus a last trade around 100-105p and tangible book of 140-145p — a discount on a discount, priced for illiquidity: “once you buy it, that’s a Hotel California situation. You have to have a plan to extract the value.”
• Andrew’s articulation of why this justified a fund-of-one: you could never accumulate 20% on-screen, and the stake compounds three edges — sector expertise, entry discount, and the ability to “try to make your own destiny.” Jeremy later built the stake to 25%. He adds that being the larger shareholder mattered for “gravitas” and any contested scenario, and that he knew the executive chairman and founder (a ~14-15% owner whose stake was essentially most of his net worth) socially from Singapore — “it wasn’t a cold call… I wasn’t an unknown quantity.” The setup also pitted a winding-down fund seeking value on a shorter timetable against the founder’s desire to run the company his way.

3. Behind the curtain, the spreadsheet math dissolves into blocking and tackling

• Jeremy’s headline learning: “No matter what it says on the balance sheet or the Excel spreadsheet, when you actually get behind the curtain, it’s so much more difficult than people imagine.” Selling assets means checking encumbrances, working line by line through the asset pool, and dealing with “jobs attached to those” — “the pain of blocking and tackling your way through an operating business versus simply doing the spreadsheet math.” Andrew adds that the actual work was “an order of magnitude more involved than I had anticipated.”
• Jeremy’s original thesis was that Avation was “too small to be a public market security” and should merge into a “structurally lower cost of capital, larger balance sheet” — “aircraft leasing is a cost-of-capital game.” Andrew illustrated potential strategic buyers as Japanese banks or finance companies and Korean or Chinese insurers. Andrew also noted that the tax treatment of individual asset sales by a listed UK PLC versus a whole-company absorption “can be quite different”; he said these were nuances he had not fully appreciated. Jeremy called that a contributing factor in why the holistic transaction did not happen. “Which is why you need the discount on the way in.”
• Worth keeping for aspiring activists: Andrew was never on the board — he was restricted and effectively an adviser on refinancings and asset sales — and even pre-boardroom campaigns involve “a huge amount of behind-the-scenes work… multiple constituents… huge amount of service providers.” From another live situation: “I have 10 different people on my commercial team for this and I haven’t got on the board yet.”

4. When your stock trades at 50 cents on the dollar, the market is punishing every new investment

• The load-bearing capital-allocation argument: Jeremy illustrated the issue with round numbers. Twenty purchase rights on $20M planes could require $40M up front, while a company with a $100M market cap and $200M of tangible assets would be trading at half tangible book. “The market’s giving you no credit for those intangibles. Zero credit.” His rule, also pitched to Japanese companies: if the market discounts every new equity dollar by 50%, “there is literally zero reason to make new investments. You should be reducing your capital. That’s the market telling you what to do.”
• Andrew’s parallel from busted net-cash biotechs: stock at $5, $10/share of cash — “they’ll be like, ‘Oh, well, don’t you trust the science?’ Like, no. You guys give yourselves stock options at $5 per share with cash at $10 — it’s creating insanely perverse incentives.”
• What actually got done: refinanced debt to cut funding costs (the key early change), bought back bonds in increasing size below par, started buying back shares, monetized a portion of the purchase rights, sold assets, and articulated a transition to next-generation eco-friendly regional aircraft. There were also approaches to buy the whole company while Jeremy was restricted — “which as you can imagine I was fully in favor of” — but they could not get to the finish line.

5. Exit at ~150p: a different bet after a 25% rally in aircraft values

• The sell decision was risk-reward, not thesis failure: gross aircraft values rose ~25% over the two years, and a decent amount of that increase was monetized through discrete asset sales. Jeremy scored the active operational work six or seven out of 10. “The risk-reward in the 140s and 150s is quite different after a big rally in aircraft prices than it was at 80.” The exit was tranched — some at 160p, 145p, and 140p, with the last tranche sold back to the company at 138p on November 5, 2025, averaging about 150p — and “the biggest winner is probably the company.” He still viewed the underlying assets and future of the company positively and thought consolidation would ultimately make sense: “the logic is largely irrefutable… the market simply has no time” for a $100M-$150M oddball UK listing.
• Andrew’s Ackman example: Ackman said that, in his firm’s public-return history, stocks sold outperformed the S&P 500 for the following three years. Andrew’s point was that trying to sell at “the absolute top” can damage the ability to exit future large positions: “it’s kind of someone else’s bet now.”
• The closing note is humility, not a victory lap — Andrew: “when I look at the investor I was 10 years ago, I’m like, god that man was stupid,” and hopefully the next post-mortem makes this one look naive too. Jeremy: “Highly possible if not likely… Lifelong learning is really important.”