Shares of Trainline PLC (LON: TRN) crashed 32.4% after the UK government announced a new government entity known as Great British Railways to manage train travel in the UK.
The new firm will manage rail infrastructure in the United Kingdom and sell train tickets in England, posing a threat to Trainline, which is currently the dominant ticketing platform in the UK.
Great British Railways will replace the National Rail website. The firm will allow users to book all their train trips on a single website threatening Trainline’s primary revenue stream, given that government resources will back the new entity.
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Trainline’s primary business is to help travellers find the best fares for their train trips, which could become redundant if all train trips in England are booked from one central portal that aggregates all trip prices and runs by the government.
However, Trainline has a few years to pivot its business, given that analysts expect the setting up of the new entity to take at least two years and the new train ticketing system to start running in 2023 at the earliest.
Trainline’s current contracts with the British government expire in 2024, and many do not expect them to be renewed since the new system should be operational by that time.
Investors will be watching the company closely to see how it repositions itself and its services to remain relevant once the new system is established.
In the meantime, I would stay away from the company’s shares until we have a good indication of the measures taken by its management to secure its prospects.
Trainline share price.
Trainline shares crashed 32.4% to trade at 288.5p, falling from Wednesday’s closing price of 426.8p.