Jet Blue IPO Valuation
To: JetBlue Management Team
From:
Subj: JetBlue IPO Price Recommendation
Date: April 11, 2002
Introduction
JetBlue is a company that was founded on not accepting the status quo with regard to how airline travel is “supposed to be”. Recent history shows that low-fare airlines are gaining momentum, and JetBlue’s business model sets us apart- our fleet is newer, more reliable and efficient. We offer the lowest cost per available seat mile than any other U.S. airline, and we do it while maintaining high quality, customer- focused service. By raising equity through a public offering, JetBlue has the opportunity to support the current growth trajectory and offset portfolio losses, thus putting us in an advantageous position for future development. The following report details some of the advantages of going public as well as the potential pitfalls, while outlining a price per share approach based on terminal value and market multiples. Finally, it discusses the ramifications of setting a price under the expected market price and ultimately suggests a potential IPO price.
Advantages and Disadvantages of Going Public
The IPO process is one that that will involve phenomenal preparation. For the next three to four months, our management team will need to focus primarily on making sure that each aspect of the process is done in such a way so as not to face any scrutiny by underwriters, the SEC of potential investors. This level of transparency may pose a potential risk, as previously private information will be available not only to potential investors, but also to our competitors. The pressure for short term success could be another drawback of going public. Investors expect forecasted projections to be met or exceeded every quarter, and as we’ve seen through the tragic events of 9/11, unexpected changes can jeopardize an entire industry. Associated costs of going public may be another potential disadvantage. Hiring lawyers, accountants, and
From:
Subj: JetBlue IPO Price Recommendation
Date: April 11, 2002
Introduction
JetBlue is a company that was founded on not accepting the status quo with regard to how airline travel is “supposed to be”. Recent history shows that low-fare airlines are gaining momentum, and JetBlue’s business model sets us apart- our fleet is newer, more reliable and efficient. We offer the lowest cost per available seat mile than any other U.S. airline, and we do it while maintaining high quality, customer- focused service. By raising equity through a public offering, JetBlue has the opportunity to support the current growth trajectory and offset portfolio losses, thus putting us in an advantageous position for future development. The following report details some of the advantages of going public as well as the potential pitfalls, while outlining a price per share approach based on terminal value and market multiples. Finally, it discusses the ramifications of setting a price under the expected market price and ultimately suggests a potential IPO price.
Advantages and Disadvantages of Going Public
The IPO process is one that that will involve phenomenal preparation. For the next three to four months, our management team will need to focus primarily on making sure that each aspect of the process is done in such a way so as not to face any scrutiny by underwriters, the SEC of potential investors. This level of transparency may pose a potential risk, as previously private information will be available not only to potential investors, but also to our competitors. The pressure for short term success could be another drawback of going public. Investors expect forecasted projections to be met or exceeded every quarter, and as we’ve seen through the tragic events of 9/11, unexpected changes can jeopardize an entire industry. Associated costs of going public may be another potential disadvantage. Hiring lawyers, accountants, and