Spirit Airlines IPO, A Disappointment But Still One To Watch (SAVE)

Spirit Airlines, Inc. (NASDAQ: SAVE) has priced its Initial public offering and the shares should begin trading today.  At first look, Spirit is going to be a disappointing IPO despite this being one of our own Top 10 IPOs To Watch In 2011.  The markets have always been more than just a bit concerned over airlines, and Warren Buffett has historically been one of the greatest foes of owning airlines.  This discount airline with services in Florida and the Caribbean was actually one of our own Top 17 IPOs to Watch in 2011.

The initial public offering was 15,600,000 shares of common stock at $12.00 per share.  Proceeds from the offering to the company were put at roughly $171 million after removing the underwriting fees and commissions. 

Citigroup and Morgan Stanley were the joint book-runners; co-managers are Barclays Capital, Raymond James and Dahlman Rose & Company.  Certain selling stockholders have granted the underwriters a 30-day option to purchase up to an additional 2,340,000 shares of common stock to cover overallotments, so if the deal gets a bump up you could have nearly 18 million shares in the float.

Where the disappointment comes into play today is that Spirit raised far less than expected.  The hope was for it to raise $300 million.  The deal was only about 60% of the original size. We were originally expecting 20 million shares to be sold in a range of $14 to $16 per share and that range was recently lowered down to $12 to $13 per share.

This pricing is hard not to call a disappointment.  Still, it has been about three years since any real airline made it public in an IPO.  This probably will not create a rush of private airlines hiring investment bankers.  It still may create a model for investment bankers and venture capital and private equity investors to re-evaluate new airline models for underserved markets.

JON C. OGG