Jet Blue Ipo Valuation Case

Introduction

JetBlue Airways (JBLU), was founded by David Neeleman in 1999, based on a platform to bring back some stability into the airline industry. He was able to raise a substantial amount of funding due to strong support for his business plan and extensive experience in the industry. This is supported that JBLU’s operating strategy shaped to be the lowest cost producing available-seat-mile in the US major airline industry in year 2001.

Initial Price Offering (SWOT Anaylsis)

Initial pricing offering can be characterized as a company “going public”, in which private firms sell publicly traded shares for the first time. The key advantage of an IPO is that it enables firms to create addition equity capital and liquidity by selling their stocks to various diversified investors. One can infer that IPO gives a company more liquidity and financial flexibility to raise capital in the equity market. It permits initial investors to diversify and facilitates the raising of new corporate cash, which may be difficult to get from private investors. In addition, an effective offering not only entails funding for short-term liquidity, but also able to allow a firm to access capital market for long term funding expenditure. Finally, it ascertains a value for the firm, which in turn creates market potential.

It seems that going public at that time for JBLU would be considerably dangerous given the risks of instability in the airline industry due to the attack of 9/11. Furthermore, one can infer that taking an infant airline company public would not particularly prudent, considering the recent 9/11 attack has deteriorated the level of investors’ confidence greatly. This can also be supported that the US economy has been in a stalemate for nearly two years.

Moreover, one has to take into account the explicit and implicit costs associated with the company going public. Specifically, the cost associated with reporting as well as compliance costs are major issues to be...