Jetblue
Learning objectives 1. institutional aspects of equity issuance transaction 2. costs and benefits associated with public share offerings 3. develop a deeper appreciation for challenges of valuing unseasoned firms and enhance corporate valuation skills
KEY QUESTIONS FOR CONISDERATION
1) What are the advantages and disadvantages of going public?
2) What different approaches can be used to value JetBlue’s shares?
3) At what price would you recommend that JetBlue offer their shares?
Potential Questions to be addressed in report submission * What is an Initial Public Offering and why is it such a big deal? * Is going public, particularly at the time they did, a good idea for JetBlue? * What do you believe JetBlue stock is really worth? * Does the financial forecast in case Exhibit 13 seem reasonable? * What are the key assumptions in the IPO valuation? * Is the length of the forecast period within the IPO valuation (exhibit 13) reasonable? * What discount rate is appropriate for the cash flow forecast? * How would you suggest estimating the terminal value? What assumptions have you made? How have your assumptions affected the estimated value of JetBlue shares?
Introduction
After the terrorist attacks on September 11, 2001, it was upset deeply because of the safety for the airline industry in the United States. The passenger demand suddenly reduced and many flights cancelled afterwards, which led a lot of American airlines declared bankruptcy afterwards, including US Airways and United Airlines. It was a challenging time for airline industry, however, David Neeleman, the CEO and Founder of JetBlue Airways, discovered an opportunity for the company. Barely two years after its foundation, the company decided to raise additional capital through initial public offering (IPO).
This report is aimed to apply financial theories and concepts into analyse the real case study of JetBlue Airline. Firstly, the
KEY QUESTIONS FOR CONISDERATION
1) What are the advantages and disadvantages of going public?
2) What different approaches can be used to value JetBlue’s shares?
3) At what price would you recommend that JetBlue offer their shares?
Potential Questions to be addressed in report submission * What is an Initial Public Offering and why is it such a big deal? * Is going public, particularly at the time they did, a good idea for JetBlue? * What do you believe JetBlue stock is really worth? * Does the financial forecast in case Exhibit 13 seem reasonable? * What are the key assumptions in the IPO valuation? * Is the length of the forecast period within the IPO valuation (exhibit 13) reasonable? * What discount rate is appropriate for the cash flow forecast? * How would you suggest estimating the terminal value? What assumptions have you made? How have your assumptions affected the estimated value of JetBlue shares?
Introduction
After the terrorist attacks on September 11, 2001, it was upset deeply because of the safety for the airline industry in the United States. The passenger demand suddenly reduced and many flights cancelled afterwards, which led a lot of American airlines declared bankruptcy afterwards, including US Airways and United Airlines. It was a challenging time for airline industry, however, David Neeleman, the CEO and Founder of JetBlue Airways, discovered an opportunity for the company. Barely two years after its foundation, the company decided to raise additional capital through initial public offering (IPO).
This report is aimed to apply financial theories and concepts into analyse the real case study of JetBlue Airline. Firstly, the