...The case “JetBlue Airways IPO Valuation” outlines JetBlue’s innovative strategy and the associated strong financial performance over the initial two years, in order to determine the price of initial public offering of its stock on April 2002. To the whole industry of Airlines, the terrorist attacks of September 2001 caused a challenge, especially to large numbers of low-fare U.S. airlines. However, JetBlue remained profitable and grew aggressively. From 2002, the low-fare business model gained momentum in the U.S. airline industry. The dominant player among low-fare airlines, Southwest Airlines, has been going so successfully with its stable growth rate of revenue (Exhibit 8) and increasing operating margin forecasts (Exhibit 5). As a relatively new company, JetBlue had made significant progress in establishing a strong brand by seeking to be identified as a safe, reliable, low-fare airline. In addition, a solid Neeleman’s management team, with David Barger and John Owen joining, was formed to enhance the success of going public. Therefore, to support JetBlue’s growth trajectory, going public and raising financing for the company is appropriate at this moment. Going public has both advantages and disadvantages. Advantages The main purpose of going public is to increase capital for the issuer. A public offering would place a value on the company's stock and insiders who retain stock may be able to sell their shares or use them as collateral. Going public also...
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...To get a proper range for JetBlue‟s offering price we will look at market multiples for the Low-Cost Airline Industry and come up with a number that makes sense, once we compare those other financials to JetBlue‟s. Below is a chart describing some of JetBlue‟s competitors and the multiples that they carried at the end of 2001. We’ve calculated what their price should be based upon these multiples and can now apply the same technique for JetBlue. Based upon the information above we can figure out what the average PE Multiple is for the five companies similar to JetBlue, which comes out to be 24.53. According to Exhibit 3 in the case write-up, JetBlue has a Diluted EPS of $1.14. Multiplying those two together would give us a Price/Share of $27.97. If we were to go off of the Pro Forma EPS ($1.30/share) the equity price would be even higher at $31.89. This is obviously a very large range, but sometimes it is best not to use static prices based upon just the current year. The case also gives forward looking ratios for these companies as well. As shown below we have gone ahead and calculated what they look like moving forward. Thus, much like before using the average EBIT multiple and PE multiple for these five companies, we can extrapolate figures for JetBlue as well and come up with an equity price of $37.71 and $13.67 respectively. Taking all five of these figures into consideration and averaging them out gives us a price of $27.81. Given th...
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...JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue Airways IPO Valuation JetBlue...
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...Case Study 1: JetBlue Airways IPO Valuation 08 Fall AFF5300 Case Studies in Finance- March 2013 Executive summary This report examines the decision of JetBlue management to price the initial public offering (IPO) of JetBlue Stock on the April 2002, a few months after the terrorist attack in September, 2001. First, the paper provided a brief introduction to JetBlue Airways and its industry. This paper revealed JetBlue’s innovative strategy and the associated strong financial performance over its initial two year. It followed by, a discussion on the advantages and disadvantages of going public (IPO) for JetBlue. The paper later provided an insight analysis of the company comparison multiples valuations (EBIT and PE multiples valuations) and the discounted cash flows to value JetBlue’s share price. It reached a conclusion that JetBlue Airways IPO should be in a range of $25 to $26 per share. By: Tam Huynh (24675512) Contents 1.0 Introduction 2 2.0 The Airline Industry and JetBlue 2 3.0 JetBlue’s Going Public 2 3.1 The Advantages of going public 3 3.2 The Disadvantage 3 4.0 JetBlue’s Valuation 3 4.1 The comparable Companies Analysis 3 4.1.1 P/E Multiple 3 4.1.2 EBIT Multiple 4 4.2 Discounted Cash Flow Analysis 5 4.2.1 Weighted Average Cost of Capital 5 4.2.2 Discounted Cash Flow Share Price Valuation 5 5.0 Recommendations and Conclusions 5 References 7 1.0 Introduction The terrorist attacks of September 2011 had a severe...
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...JETBLUE AIRWAYS IPO VALUATION Teaching Note This case examines the April 2002, decision of JetBlue management to price the initial public offering of JetBlue stock during one of the worst periods in airline history. The case outlines JetBlue’s innovative strategy and the associated strong financial performance over its initial two years. Students are invited to value the stock and take a position on whether the current $25–$26 per share filing range is appropriate. The case is designed to showcase corporate valuation using discounted cash flow and peer-company market multiples. The epilogue details the 67 percent first-day rise in JetBlue stock from the $27 offer price. With such a backdrop, students are exposed to one of the well-known finance anomalies—the IPO underpricing phenomenon—and are invited to critically discuss various proposed explanations. The case provides opportunities for the instructor to develop any of the following teaching objectives, • Review the institutional aspects of the equity issuance transaction. • Explore the costs and benefits associated with public share offerings. • Develop an appreciation for the challenges of valuing unseasoned firms. • Hone corporate valuation skills, particularly using market multiples. • Evaluate the received explanations of various finance anomalies, such as the IPO underpricing phenomenon. Study Questions 1. What are the advantages and disadvantages...
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...Case 1- JetBlue Airways IPO Valuation - Jing Zhang ( 23913134 ) A company issue stocks to generial public at its first time on a security exchange is call Initial Public Offering( IPO ). Initial Public Offering enable a company to raise capital from the public rather than private investors or institutions. IPO is considered as such a big deal for a company mainly because the company become a public corporation and have to be monitored by general pubic after IPO. Going public has bought about a considerable numbers of benefits. For instant, IPO increse the liquidity of capital and enable cheaper access to open market. Furthermore, going public enhance the popularity of a company and make it easier to fund from other financial institutions such as commercial banks in the future. On the other hand, the cost of IPO is expensive and it requires a company to disclose the financial and business information to publc investors. JetBlue Airways Corporation is an American low-fare airline headquartered in New York city and its home base is John F. Kennedy Airport( JFK ). Following the terrorist attacks of September 2001, tbe U.S airline industry was experiencing an unprecedented hardship. At that time, airline industry is considered as an high-risk industry in terms of investment, and it was widely believed that the market lost faith in airline industry. However, in Apirl 2002, JetBlue Airways decided to have its Initial Public Offering just two...
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...JetBlue Case Study Analysis JetBlue Airways Corporation Overview JetBlue Airways Corporation is an American low-fare airline, which headquartered in the Long Island City near the New York City. Its main base is John F. Kennedy International Airport. Basically, the airline mainly serves destinations in the United States, as well as many Latin American countries. As of October 2013, JetBlue serves 84 destinations in multiple countries. Low-fare airline is an airline that generally with a lower operating cost structure. In many people’s view, low-are airline also with has low ticket prices and limited services. However, JetBlue is a low-fare airline corporation with a goal of fixing everything that “sucked” about airline travel. Its passengers could get unique flying experience by providing new aircraft, simple and low fare, leather seats, free LiveTV at every seat, preassigned seating, reliable performance, and high-quality customer service. JetBlue Airways Corporation David Neeleman, the starter of JetBlue, had raised funds of $130 million for this brilliant company at the beginning. Even JetBlue has strong support from venture-capital community, it also had the intent to go public in April 2002. At that time, the whole industry was still in recession due to 9/11 attack. A company sells stock shares to the general public for the first time via security exchange, it is Initial public offering (IPO). Before IPO, there is no general shareholders in the company. After IPO,...
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...JetBlue Airways Corporation (NASDAQ: JBLU) is an American low-cost airline with its main base John F. Kennedy International Airport, also in Queens. In 2001, JetBlue began a focus city operation at Long Beach Airport in Long Beach, California, and another at Boston's Logan International Airport, in 2004. It also has focus city operations at Fort Lauderdale – Hollywood International Airport and Orlando International Airport. The airline mainly serves destinations in the United States, along with flights to the Caribbean, The Bahamas, Bermuda, Colombia, Costa Rica, Dominican Republic, Jamaica, and Mexico. As of November 8, 2010 JetBlue serves 62 destinations in 21 states (including Puerto Rico), and eleven countries in the Caribbean and Latin America.[1] JetBlue also maintains a corporate office in Cottonwood Heights, Utah, a satellite office in Darien, Connecticut, and its Information Technology center in Garden City, New York. JetBlue is a non-union airline. JetBlue was one of only a few U.S. airlines that made a profit during the sharp downturn in airline travel following the September 11, 2001 attacks. Since its IPO on the NASDAQ stock exchange in 2002, JetBlue has become one of the most popular airline stocks in history and currently has about two billion dollars in market capitalization. Financial results were strong for the airline throughout the 2002–2004 years, and many analysts and journalists lauded the airline for its success. As of December 31, 2009 JetBlue Airways...
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...of Law and Economics Case Study 26 “JetBlue Airways IPO Valuation” Lecturer: Kou Lim Hong Prepared By: 1. Ms. Khoun Davy 2. Ms. Khoun Dalin 3. Ms. Chiem Sothana 4. Mr. Soksithika 5. Mr. Oag Sothearith 6. Mr. Mov Vandara MFM, Group 2 team 6 2011-2012 Outline of The Presentation I. II. Introduction of Case Study Main Problem III. Literature Review IV. Case analysis V. Conclusion Outline of The Presentation I. II. Introduction of Case Study Main Problem III. Literature Review IV. Case analysis V. Conclusion Introduction of Case Study JetBlue Airway Background JetBlue airways are a low cost airline established in July 1999 by David Neeleman. David Neeleman was experienced in the operations of airline and start up airlines. The airline was to provide new levels of service in the airline travel industry, concentrating on customer service and low fares. Introduction of Case Study JetBlue Airway Background David Neeleman plan was to commit to innovation in people, policies and technology to keep the companies planes full and thus the company profitable. To ensure this goal and the company’s future David Neeleman assembled and impressive management team and group of investors. JetBlue’s COO was to be David Barger ex-vice president of Continental Airlines. John Owen who was executive vice-president and treasurer of Southwest Airlines agreed to become JetBlue’s CFO. Introduction of Case Study JetBlue Airway Background David Neeleman received...
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...| JetBlue Airways | | Valuation of an IPO Case Study | | JetBlue Airways | | Valuation of an IPO Case Study | 2014 Ivan McClure, Imtiaz Saboor, Vanessa Lopes, Gilberta Pjetri 2014 Ivan McClure, Imtiaz Saboor, Vanessa Lopes, Gilberta Pjetri TABLE OF CONTENTS * History * Advantages & Disadvantages of an IPO * IPO Process * Weighted Average Cost of Capital (WACC) * Similar Company Analysis * Discounted Cash Flow Analysis * Final Decision History David Neeleman, an experienced entrepreneur in airline startups, announced that JetBlue would bring “humanity back to air travel” on July 1999. He was convinced that his commitment and innovation would keep the planes full and moving despite the fact that 87 new-airline startups had failed in the last twenty years. An impressive new management team and growing group of investors shared Neeleman’s vision. JetBlue’s management team included David Barger, former vice president of Continental Airlines. Neeleman received strong support in funding from high-profile firms such as Weston Presidio Capital, Chase Capital Partners, and Quantum Industrial Partners, and quickly raised $130 million. Neeleman’s goal was to “fix everything that sucked about air travel”. His strategy was built on that goal as well providing the passengers with new aircraft, simple and low fares, leather seats, free Live TV at every seat, pre-assigned seating, and high quality customer service...
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...JetBlue IPO – Case Study IPO Process An initial public offering (IPO) is selling traded equity to the public on a securities exchange for the first time. The initial public offerings are used by companied to raise additional capital, and to transform from a private company into a public company. The IPO process is as follows. 1. Selecting an underwriter 2. Due diligence 3. Preliminary registration 4. SEC review 5. Road show and book building 6. The offering settlement There are many advantages and disadvantages of going public through an IPO. Advantages Increased capital from public offering * Increased liquidity * Public market creates shareholders’ value * Facilitates merger & acquisition – shares can be used instead of cash * Accelerates company’s growth * Increased recognition * Employee stock options are valuable Disadvantages * Costs and time demands – costs associated with reporting could be significant and more time needed for statements preparations. * Information disclosure – information may be visible to competitors. * Financial reporting and administration burdens of complying with SEC * Control – managements may experience loss of control. * Increased risk of shareholder litigation * Increased restrictions The issue of JetBlue The issue is that there is a debate among the JetBlue management about the appropriate pricing of the IPO. The analysts reported that demand exceeded supply...
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...Mavis Lei JetBlue Airways IPO Valuation Introduction and Recommendation In July 1999, David Neeleman had announced his plan to launch a new airline company that would bring “ humanity back to air travel” despite the fact that U.S. airline industry had lot failures over the past 20 years. JetBlue had target its strategy and operating philosophy by offering customers low –fares tickets, high performance of customer service, providing new aircrafts and focused on point-to-point service to large metro areas. JetBlue’s operating strategy had produced the lowest cost per available-seat-per-mile of any major U.S. airline in 2001- 6.98 cents versus an industry average of 10.08 cents. JetBlue’s early success was often attributed to his extensive experience with airline start-ups. In 2002, Southwest airline was the pioneer in low-fare air travel. It was also the fourth-largest carrier in America and in the world. JetBlue remained profitable during the recession in the airline industry in the terrorist attacks of September 2001. To support the company’s growth, management was ready to raise additional capital through a public equity offering. With co-lead manager Morgan Stanley, the initial price range for JetBlue shares, was $22 to $24. The demand had excess the supply, 5.5 million of shares planned for the IPO while management had recently filed an increase in the IPO range ($25 to $26). The most recent IPOs among low-fare airlines were of non-U.S. carriers. Ryanair, WestJet...
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...[pic] IPO Valuation By: Ryan DeCoudres & Jose Alessandro de Vasconcelos March 24, 2009 TABLE OF CONTENTS INTRODUCTION 2 COMPANY AND INDUSTRY BACKGROUND 3 GOING PUBLIC 4 THE IPO PROCESS 5 JETBLUE VALUATION 10 RECOMMENDATION 12 WHAT HAPPENED 12 REFERENCES 15 INTRODUCTION Following the terrorist attacks of 9/11, the airline industry was in the doldrums. Many of the largest carriers in the nation had filed for bankruptcy protection and were asking the federal government for help so they could survive. Certainly few people at this time considered the airline industry to be an extremely profitable venture, but where others saw despair, David Neeleman, CEO and founder of JetBlue Airways, saw opportunity. In 2002, after 2 years of profitable operations and less than a year after the attacks that shook the industry to its core, JetBlue Airways had its Initial Public Offering (IPO) and went public. This case study outlines the IPO underwriting process and uses JetBlue as an example to describe the steps throughout the way. It also asks the analyst to come up with a valuation for this IPO, based on the financial and non-financial data presented. In the following pages, we will discuss the pros and cons of going public, the IPO process itself, and walk through the calculations that led us to our...
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...Introduction and industry analysis JetBlue Airway Corporation is an American low-cost airline and it was one of a few U.S. airlines that were profitable during the sharp downturn in airline industry affected by the September 11, 2011 attacks. With its strong capital base, the company was successful due to its impressive management team, in which, David Neelaman has rich experience with airline start-ups; COO David Barger and CFO John Ower are all experienced former senior managers from other airlines. The company’s sales rose from $104,618 to $320,414 from December 2000 to December 2001 and net profit is negative $21,330 in December 2000 and reach positive $38,537 only one year later. As we can see, the company is a high growth company with huge potential. To meet its further growth needs, it going to public to finance more money. The advantage of IPO is by raising more capital, the firm could use the capital to fund capital expenditure (buy more airplanes), pay off existing debt and also it increase public awareness and let potential customers know their products. Subsequently, this may increase its market share. And the venture capitalists may want to use IPO to cash in on JetBlue as they helped start-up. The disadvantages is that JetBlue has to disclosure more information for investors, prepare periodic financial reporting and they must also meet other rules and regulations that supervised by SEC. it is always costly of complying with regulatory requirements, such as preparing...
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...BAB I PENDAHULUAN 1.1. Selayang Pandang 1.2. Rumusan Masalah Setelah membaca dan mempelajar kasus ini dengan baik, kami mencoba menyimpulkan masalah yang ada kasus dalam pertanyaan sederhana 1. Berapakah harga saham yang tepat untuk IPO Jetblue Airways? BAB II ISI Dalam melakukan valuasi atas saham IPO dari perusahaan penerbangan Jetblue Airways, kami melakukannya melalui empat pendekatan, antara lain: 1. Gordon Growth Model (GGM) 2. P/E Multiple Method 3. Total Capital Method 4. Discounted Cash Flow Valuation (DCF) Berikut kami sajikan valuasi kami untuk masing masing dari keempat metode diatas. 2.1. Gordon Growth Model (GGM) Gordon Growth Model (GGM) merupakan model dengan asumsi paling sederhana dari model model lain yang tersedia. GGM mengasumsikan bahwa perusahaan yang menjadi objek valuasi merupakan perusahaan yang sudah cukup mapan dan memiliki tingkat pertumbuhan yang konstan. Dengan asumsi ini, valuasi kemudian dilakukan dengan menghitung nilai kini dari semua dividen yang akan diterima hingga jangka waktu tak terbatas. GGM dapat disederhanakan secara matematis melalui formulasi sebagai berikut: Stock Price = D (1+g) / (r-g) Dimana: D = the annual dividend g = the projected dividend growth rate, and r = the investor's required rate of return Meskipun secara matematis terlihat sederhana, dalam praktiknya GGM memiliki resiko tidak representatif. Asumsi bahwa pertumbuhan dividen adalah konstan merupakan asumsi...
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