Spirit Airlines Is Up By 12%, Here Is Why

Key Insights

• JetBlue urges Spirit shareholders to “Vote No” on Frontier transaction. 
• The company offers to buy Spirit for $30 per share in cash. 
• The offer represents a 77% premium to Spirit’s latest closing price.

Spirit Airlines Rallies After JetBlue Announces New Tender Offer

Shares of Spirit Airlines gained strong upside momentum after JetBlue announced that it had launched “an all-cash, fully financed offer to purchase all the outstanding shares of common stock at $30.00 per share” and urged Spirit shareholders to vote against the transaction with Frontier.

Back in February, Frontier announced a definitive merger agreement with Spirit, offering 1.9126 shares of Frontier plus $2.13 in cash for each share of Spirit Airlines.

In April, JetBlue made its own offer, which was rejected by Spirit Airlines’ board. As a result, JetBlue decided to appeal directly to Spirit shareholders.

Not surprisingly, Spirit stock rallied after the new offer was announced. The Frontier offer had a significant stock component, which was bearish for Spirit stock as Frontier stock has been moving lower in recent months. JetBlue offers cash, which could attract Spirit shareholders.

What’s Next For Spirit Airlines Stock?

The new offer from JetBlue implies a huge premium for Spirit shares as JetBlue offers $30 per share in cash compared to Spirit’s previous closing price of $16.98.

The key question is whether JetBlue will be able to receive all regulatory approvals in case Spirit shareholders vote against the Spirit/Frontier transaction in order to take JetBlue offer.

It remains to be seen whether shareholders will choose JetBlue offer due to regulatory uncertainty, so Spirit stock will continue to trade at a material discount to the offer price of $30.00 per share.

Most likely, the upcoming trading sessions will be extremely volatile, and traders should be prepared to react to new information released by all parties of this drama.

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