Key points:
- Spirit Airlines stock rallied 10.2% on Jetblue’s revised acquisition offer.
- The airline’s shares are still trading way below JetBlue’s offer price.
- Investors could have a window of opportunity here, but it is risky.
The Spirit Airlines Incorporated (NYSE: SAVE) stock price rallied 10.2% after JetBlue Airways raised its acquisition offer price for the budget airline by $2 to $33.50 per share. JetBlue is trying to convince Spirit shareholders to accept its offer, which values Spirit at over $3.6 billion compared to the Frontier Airlines offer, which valued it at $2.9 billion.
Also read: The Best Travel Stocks To Buy Right Now.
The merger deal between Spirit Airlines and Frontier Airlines has run into trouble since it was part-funded in cash and partly by a share swap as Frontier’s stock price has fallen since the deal’s announcement in February.
Spirit Airlines had rejected JetBlue’s offer saying that regulators are likely to scuttle the deal due to JetBlue’s alliance with American Airlines in the Northeast United States, which has attracted regulatory scrutiny in the past.
SAVE stock is trading at $22-$23, indicating that most investors do not believe JetBlue’s offer will be accepted, given the significant premium JetBlue offers. Another significant advantage associated with JetBlue’s offer is that it is an all-cash deal; hence, it cannot decay like the Frontier Airlines deal.
However, things could change as Spirit Airlines shareholders are scheduled to vote on the Frontier offer on June 30, 2022. After that, we will know whether JetBlue’s offer will still be in the running. If the shareholders accept Frontier’s offer, JetBlue will be out.
Aggressive investors may buy SAVE stock now in anticipation of shareholders voting in favour of the revised JetBlue offer simply because it puts more money in their pockets. Such investors would sell their shares after the vote and lock in the gains as SAVE stock is likely to spike higher to catch up with JetBlue’s offer.
However, such investors risk a further decline if shareholders vote in favour of Frontier’s offer. This is the fundamental nature of investing, you have to take on some risk for excellent returns, and sometimes you will incur a loss if your investment thesis does not work out.
*This is not investment advice. Always do your due diligence before making investment decisions.
Spirit Airlines (SAVE) stock price.
The Spirit Airlines (SAVE) stock price surged 10.24% to trade at $23.46, rising from Friday’s closing price of $21.28.
