Spirit Airlines Stock Plummets Following JetBlue’s Warning of Possible Merger Termination

By Maggie Last updated Jan 27, 2024

Shares of Spirit Airlines Inc. tumbled Friday after JetBlue Airways issued a warning that it might cut its merger plans.

JetBlue Airways disclosed in its 8-K filing with the Securities and Exchange Commission that it notified Spirit that certain closings would be required to complete the merger as agreed upon at the deadline. JetBlue states the merger agreement will terminate on or after January 28, 2024.

In response to JetBlue’s warning, Spirit Airlines issued its 8-K statement stating that it believed there was no reasonable basis for the merger. may terminate the merger agreement. Spirit reaffirms its commitment to fulfill all obligations under the agreement and expects JetBlue to do the same.

Spirit’s stock price had fallen to $5.70 on January 18 after a court decision blocked the merger, raising concerns about Spirit’s ability to raise financing if the partnership fails. Despite Spirit’s efforts to persuade investors and the two companies to submit to arbitration, Spirit’s shares fell 16.2% on Friday, nearly erasing an earlier rise. By comparison, shares of JetBlue Airways rose 0.6%.

JetBlue said it is currently evaluating merger options. In the event of termination for failure to provide legal protection, JetBlue must pay $70 million to Spirit in addition to compensation to Spirit members; $400 million less than the previously agreed upon total amount.

In the last three months, Spirit Airlines’ shares decreased by 62.2%, while JetBlue Airways’ shares increased by 25.8%. By comparison, the US Global Jets ETF (JETS) gained 27.5%, while the S&P 500 Index (SPX) gained 18.5%. The situation remains stable as the two companies deal with uncertainty over the merger’s fate.