Shares of Spirit Airlines Inc. tumbled Friday after JetBlue Airways Corp. warned that the air carriers’ merger may need to be terminated.
Spirit took issue with JetBlue’s warning, saying it expects JetBlue to stand by the merger agreement.
JetBlue
JBLU,
disclosed in an 8-K filing with the Securities and Exchange Commission that it had informed Spirit
SAVE,
that “certain closing conditions” required by the merger deal “may not be satisfied” before the agreed-upon deadline.
As a result, JetBlue said “the merger agreement may be terminable on and after January 28, 2024.”
Spirit responded with an 8-K filing of its own: “Spirit believes there is no basis for terminating the Merger Agreement. Spirit will continue to abide by all of its obligations under the Merger Agreement, and it expects JetBlue to do the same.”
Spirit’s stock had plunged to a record low of $5.70 on Jan. 18 after a court ruling that blocked the carriers’ merger fueled concerns about Spirit’s viability if the merger isn’t completed. It bounced slightly after Spirit tried to reassure investors about its finances and after the companies appealed the court ruling.
On Friday, Spirit’s stock took a 16.2% dive to nearly erase that bounce, while JetBlue shares gained 0.6%.
JetBlue said it continues to evaluate its options regarding the merger deal.
If the merger is terminated due to the failure to obtain antitrust regulatory clearance, JetBlue would be required to pay Spirit $70 million, and to pay Spirit stockholders the excess of $400 million minus the sum of the approval prepayments previously paid to Spirit stockholders.
Over the past three months, Spirit shares have plummeted 62.2%, while JetBlue’s stock has soared 25.8%. In comparison, the U.S. Global Jets exchange-traded fund
JETS
has run up 27.5% and the S&P 500 index
SPX
has advanced 18.5%.
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