Shares in the low-cost airline (and late-night punchline) Spirit Airlines (NASDAQ:SAVE) plunged after a judge blocked its $3.8 billion merger with JetBlue (NASDAQ:JBLU).
There are now real fears of a bankruptcy filing and liquidation.
Spirit closed at $7.92 per share on Jan. 16 and was trading at around $6.75 in pre-market trading this morning. The market capitalization at that price is a little over $700 million. Before the ruling, SAVE stock was trading at over $16 per share.
Lost Horizon
JetBlue announced it would buy Spirit in October 2022 for $33.50 per share after a similar deal between Spirit and Frontier Airlines (NYSE:FTR) collapsed.
A 113-page ruling from Judge William Young argued the merger would create “anticompetitive harm.”
While the decision was seen as a win for the Biden administration and the U.S. Justice Department’s antitrust stance, a liquidation would be a net loss. In a statement, the two airlines said they are “evaluating our next steps as part of the legal process.”
Spirit won a following with low prices, making some of that up with fees for what other airlines give away, like carry-on bags and water. Former Daily Show host Trevor Noah made these charges a recurring punchline, and other comedians followed.
JetBlue has not been the butt of as many jokes, but it has emulated some of Spirit’s fees.
Analysts saw little to prevent a bankruptcy filing. They said other airlines added capacity in late 2023 and that Spirit’s business has nosedived since the merger announcement.
During the third quarter of 2023, Spirit lost an adjusted $150 million, $1.37 per share, on revenue of $1.25 billion. It blamed “softer demand for our product and discounted fares in our markets” for the results.
SAVE Stock: What Happens Next?
A liquidation would be a deliberate blow to the Biden administration. While the impact on travelers and other airlines would be minimal, it would also be highly publicized.
As of this writing, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
