Activist investor Carl Icahn has amassed a 9.91% stake in JetBlue Airways (JBLU 13.18%), and different traders are becoming a member of him onboard. Shares of JetBlue opened up 17.2% on Tuesday and have been up about 11% as of 10 a.m. ET after the stake was disclosed.
A brand new face within the cockpit
JetBlue has been flying by headwinds of late. In 2022, the airline gained a bidding conflict for Spirit Airways (SAVE -6.84%), however that deal was blocked resulting from antitrust considerations earlier this 12 months. The airways are interesting, however within the meantime, JetBlue additionally sacrificed an vital alliance with American Airways Group in hopes of getting the Spirit deal completed.
The airline has a brand new CEO and faces tough decisions because it tries to enhance operations and waits on its attraction of the Spirit ruling.
Into the fray steps Icahn, who disclosed the stake in an in a single day regulatory submitting. On the submitting, Icahn stated he believes the shares are “undervalued and represented a lovely funding alternative,” saying that he has had — and intends to proceed to have — discussions with administration and administrators about doable board illustration.
Icahn has a protracted historical past of airline investments, although not all have been profitable. He was famously concerned for years with Trans World Airways, which fell into chapter 11 in 1992. It was finally offered to American a decade later.
Carl Icahn is shopping for JetBlue — do you have to?
Shares of JetBlue are practically 70% under their highs from just some years in the past. By that measure, Icahn is nearly definitely proper that the inventory is undervalued. Alas, the tougher query is how JetBlue will be capable of pull out of its tailspin.
JetBlue agreed to purchase Spirit close to the height in what’s at all times a cyclical business, so it could be considerably relieved if the deal falls by. However the airline has no straightforward path for progress absent a merger and has seen operations deteriorate whereas it has been centered on getting the deal accomplished. Though airways noticed demand maintain up nicely in 2023, there stay persistent fears that inflation and a slowing economic system might take their toll.
Icahn may need a playbook to deliver JetBlue again, however till we hear extra particulars about what he plans or the place the airline may go from right here, warning is suggested.
Lou Whiteman has no place in any of the shares talked about. The Motley Idiot has no place in any of the shares talked about. The Motley Idiot has a disclosure coverage.
