JetBlue Airway IPO Valuation
1 Executive Summary
This report discusses whether and how JetBlue should list its shares on public from several angles. Two principal incentives prove that the IPO process could be inevitable, even without an optimal offering price, and valuation models including multiples comparison and income analysis imply the firm may be underpriced. Given the situation and all assumptions, an increment in either offering size or price is suggested.
2 SWOT and Background
JetBlue started by following Southwest's approach of offering low-cost travel, but sought to distinguish itself by its amenities, such as in-flight entertainment, TV on every seat and Satellite radio. Barely two years after its foundation had the company made profit and decided to raise money through IPO. The initial price for JetBlue shares, as by potential investors, was $22 to $24. While facing sizable excess demand for the 5.5 million shares, management was considering an increase in the offering’s price range.
3 Listing Analysis
Theoretically, firms acquire liquidity, monitoring and credibility after going public, and at the same time undertake all costs of time, money or loss of control and any further obligations and responsibilities. The general pros and cons for listing is shown in the table below.
According to the case, the two main reason drove JetBlue going public are: a) Staying in expansion; and b) Bailing out venture-capital investors. These two needs can be both significant and urgent, which could be the causative reason of listing above all other incentives.
General advantages of listing
General disadvantages of listing
1. Access to future capital
Going public creates cash for future financing needs and a type of currency in form of stock.
1. Costs and time involved
A firm pays 50-250 thousands to publicize an IPO, counted for 15-20% of proceeds.
2. Public awareness
Info about the firm spreads to whole country. New chances arise with new customers.
2. IPO Risks
An unforeseeable
This report discusses whether and how JetBlue should list its shares on public from several angles. Two principal incentives prove that the IPO process could be inevitable, even without an optimal offering price, and valuation models including multiples comparison and income analysis imply the firm may be underpriced. Given the situation and all assumptions, an increment in either offering size or price is suggested.
2 SWOT and Background
JetBlue started by following Southwest's approach of offering low-cost travel, but sought to distinguish itself by its amenities, such as in-flight entertainment, TV on every seat and Satellite radio. Barely two years after its foundation had the company made profit and decided to raise money through IPO. The initial price for JetBlue shares, as by potential investors, was $22 to $24. While facing sizable excess demand for the 5.5 million shares, management was considering an increase in the offering’s price range.
3 Listing Analysis
Theoretically, firms acquire liquidity, monitoring and credibility after going public, and at the same time undertake all costs of time, money or loss of control and any further obligations and responsibilities. The general pros and cons for listing is shown in the table below.
According to the case, the two main reason drove JetBlue going public are: a) Staying in expansion; and b) Bailing out venture-capital investors. These two needs can be both significant and urgent, which could be the causative reason of listing above all other incentives.
General advantages of listing
General disadvantages of listing
1. Access to future capital
Going public creates cash for future financing needs and a type of currency in form of stock.
1. Costs and time involved
A firm pays 50-250 thousands to publicize an IPO, counted for 15-20% of proceeds.
2. Public awareness
Info about the firm spreads to whole country. New chances arise with new customers.
2. IPO Risks
An unforeseeable