Summary
- JetBlue’s stocks surged after billionaire Carl Icahn purchased a nearly 10% stake on Monday.
- The airline has faced challenges this year, including a blocked merger proposal and route cuts.
- Icahn’s purchase increased JetBlue’s stock by nearly 20% in after-hours trading.
JetBlue Airways’ stocks skyrocketed on Monday after American billionaire Carl Icahn bought a stake of nearly 10% in the carrier. It comes as the businessman reportedly believed the airline’s stock was “undervalued.”
JetBlue has already faced challenges this year, from its blocked merger proposal with Spirit Airlines and the announcement of a few route cuts. The carrier is reportedly “always open” to investors to improve its position in the stock market.
Not enough value
After securing shares purchased from the middle of last month to this week, Icahn reported a 9.9% stake in JetBlue, according to Forbes. The shares reportedly closed up more than 2% at $6.07 on Monday but increased by 19% in after-hours trading after Icahn’s reveal. At 19:45 EST, the results were just over $7.00 per share, equivalent to 16% above the closing price.
Photo: Eliyahu Yosef Parypa I Shutterstock
Forbes reports that the billionaire investor decided to purchase the stake because he viewed JetBlue’s stock as “undervalued.” Citing Icahn’s team, the businessman also plans to talk to the carrier’s management about potentially obtaining a position on the board.
JetBlue Wants Its Spirit Airlines Merger Appeal Fast Tracked
The District Court of Massachusetts blocked the merger earlier this month.
In a statement to CNBC, JetBlue said it is willing to have “constructive dialogue” with its investors.
“We are always open to constructive dialogue with our investors as we continue to execute our plan to enhance value for all of our shareholders and stakeholders.”
It is estimated that Icahn holds a net worth of $6.3 billion, reportedly rising by $74 million from just Friday. Shares of the businessman’s firm, Icahn Enterprises, closed at more than $19.00 on Monday before it jumped nearly 2% in after-hours trading. It is not the first time Icahn has been involved with airlines. In the late 1980s, he invested in Trans World Airlines (TWA) before it eventually faced struggles and filed for bankruptcy, according to CNBC.
Financial setbacks
In early 2021, JetBlue’s stock was trading at around $20 per share before falling significantly over the subsequent two years. According to Forbes, its stock trades have been situated around $5 so far this year – lower than during the pandemic. As of Monday’s close, the carrier’s stock has been down over 27% in the past year.
Photo: Bradley Caslin | Shutterstock
The airline last reported an annual profit in 2019 before the global health crisis shook the aviation industry. JetBlue has since introduced cost-cutting strategies such as cutting routes, staff buyouts and deferring over $2 million worth of aircraft spending to other areas.
Recent challenges
JetBlue’s uphill battle was also exacerbated last month when a judge blocked the airline’s planned acquisition of Spirit. It came less than a year after the carrier had to end its partnership and alliance with American Airlines due to a lawsuit from the Justice Department.
The airline explained last month that it plans to reduce costs by as much as $200 million by the end of 2024 while working on solutions to increase its revenue. Additionally, JetBlue recently appointed a CEO and brought back former executives to help it boost its profitability. 51-year-old Joanna Geraghty made history on Monday, beginning her tenure as the airline’s newest CEO.
Joanna Geraghty Takes Over JetBlue And Becomes First Female Airline CEO In The US
JetBlue’s new CEO will need to guide the airline as it overcomes several operational and financial challenges.
