JetBlue is definitely planned to establish by David Neeleman in July 99. Although the terrorist attacks of 9/11 produced the huge loss in the whole air travel industry, JetBlue airways make an effort to publish its IPO after 2 years of profitable operation in 2002, This case examine is outlining the stage to publish the IPO. Next, it will go over the disadvantage and advantage to create the GOING PUBLIC and utilize financial data to evaluate the price is suit pertaining to the first publish. In such a case, there are three different reveal valuation methods: P/E multiple (comparison pricing); EBIT multiple (comparison pricing) and reduced free cashflow (fundamental pricing). Analysis the power and pitfall with the IPO
JetBlue has been successful to duplicate Southwest's strategy which supplies high plane utilization and low cost. The cost of every available-seat-mile is a lowest in the major U. S. flight in 2001 which is 6th. 98 nickle compare with the industry common of twelve. 08 cents. On the other hand, JetBlue provides secure and convenient travel knowledge such as household leather seats and free live TV. After these good operations, JetBlue needed to raise capital use IPO for the even more expansion. Although the non U. S. low-fare airlines had been publish IOP and the go back is sensible, there still have disadvantages to accomplish this. Advantages:
one particular For the financial purpose, to issue IPO may increase the fluid. Once to issue the IPO, JetBlue can get the money directly from investors. For example , JetBlue plan to issue 5, 500, 000 shares which range of prices $25 to $26. 2 For competition reason, client, supplier and investors are increase self-confidence of the business and enhancing the stability and competitive position of the organization. On the other hand, it can improve the company's reputation. 3 For the expansion perspective, by providing IPO, JetBlue can enhance the governance composition. 4 To get the rich reason, supplying IPO will greatly boost shareholder worth and enterprise value. Disadvantage:
1 The cost is larger to supplying IPO. After the company decides to offer the IPO, they need to make the huge doc about legislation and accounting information. Likewise the cost of period is obviously. a couple of The owner wills loss control.
3 In line with the rules of SEC, information disclosure is yet another problem. Not merely competitors can certainly get the financial information and in addition increasing the expanse to additional accounting staff and prepare the report. 5 Put even more pressure via investors to managers to enhance position from the company. Evaluate the IPO price: Comparable companies' analysis
PRICE TO EARNINGS Multiple: to acquire the proper selection for the JetBlue's supplying price, we look the financial data from your Low-cost Aircarrier Industry that are AirTran, Frontier, Ryanair, Southwest, Westlet. Based on the data of competitors which usually carried by the end 2001, we can calculate the retail price should be centered these interminables and it is similar or JetBlue. | Trading| | | Leading|
| Price/ Share| Earnings/ Share| PE Multiple| Earnings/ Share| RAPID EJACULATIONATURE CLIMAX, Multiple| AirTran| 6. 6 | zero. 3 | 25. 287356| 0. 3 | 20
Frontier| seventeen. 0 | 2 . zero | 8. 3743842| zero. 4 | 45. 945946
Ryanair| 32. 1 | 0. several | forty-four. 024725| zero. 9 | 34. 095745
Southwest| 18. 5 | 0. six | twenty seven. 586207| 0. 7 | 28. 430769
WestJet| 12-15. 9 | 0. almost 8 | 19. 567901| zero. 6 | 26. 864407
Average | | | 24. 968115| | thirty-one. 067373
Jetblue (trailing)| twenty eight. 463651| 1 . 14| | |
Jetblue (leading)| 40. 387585| | | 1 . 3|
In the beginning, we individually calculate the regular of the low-cost Airline industries PE Multiple using the Trading data and Leading info. The data of Earnings/ Share of Jetblue, we find them from exhibit 3. After the calculation, the purchase price range of Jetblue is $28. 5 to $40. 5. EBIT Multiple:
| | | Trailing| | Leading|
| Price/ Share| Book Debt/ Share| EBIT/ Share| EBIT multiple| EBIT/ Share| EBIT multiple| AirTran| 6. 6 | four. 0 | 0. eight |...
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