BeatNavy

You shouldn’t use your cost basis as a metric in your selling decisions (unless you’re doing something for tax loss harvesting purposes or something similar). “Past performance is not indicative of future results”- there’s a reason that’s on basically every investment website/prospectus/quarterly report/etc. If you were to say you believe the stock is undervalued and has more longer term value than is currently reflected in the share price (which you kind of alluded to elsewhere in this post), that’s a legitimate thesis. But selling/not selling based on the price you bought it is not a sound investment strategy (don’t take my word for it. Go ask a professional). You should constantly value the stocks you own based on their present valuation combined with their future prospects for growth—both of which are completely irrelevant to your purchase price (which should have used the same present/future value analysis at the time you bought).

If you think $30 is too low of a value for SAVE stock for you to sell on a 12-24 month timeline, then I assume you are buying a lot of shares here in the teens? If you liked it enough at $28 to buy it…then you must love it at $19. You’re literally saying you think the stock is worth north of 150% of what professional investors are currently buying/selling it at, and would turn down today a 1-2 year 50% ROI (that’s better than any professional fund manager and investor could do consistently) thinking you can do better by holding. Additionally, if you’re of the opinion that F9/NK stock is undervalued and believe in the ULCC business model and its future prospects, you could buy a ton of ULCC stock, also basically at an all time low, since the elimination of spirit would open more opportunity with less competition with spirit gone, and as a SAVE shareholder you’ll end up with ULCC shares anyway. Anyway, don’t take financial advice from me or any other pilots, but I urge you to refine your investment strategy (or at least the part about using your purchase price as a basis or partial basis upon which to sell, instead of solely evaluating current/future value as it relates to the current share price).

And why is B6 paying a premium to buy NK? Because that’s how all acquisitions work. You can’t really buy a public company without offering a premium to the current share price…that’s how M&A works. Whether or not that turns out to be a wise investment is a giant TBD/question mark. It could help put B6 into a bankruptcy (would be a funny coincidence since B6+NK=BK…but I digress) if those headwinds and acquisition/integration costs prove to be too great, especially if revenue falls with the economy tanking and oil rising, and if the integration faces a lot of issues as I predict it would trying to mix oil and water with the vastly different labor groups, cultures, and products.

And offering a premium to close a buyout isn’t necessarily “overpaying” as you characterize it. Overpaying is when you pay more than something is worth, like what Alaska did with Virgin. In the models that the B6 finance team has made, the $3.6bn price and $4-$5bn in overall merger costs will yield a greater return than by staying organic. Also of note, what jetblue would get planes, pilots, and bases wise from spirit is a much better deal dollar for dollar than what it would have gotten from Virgin, even at $30/sh or $3.6bn. And side note: covid allowed jetblue to get organically everything it would have gotten from Virgin (which sold to Alaska for $2.6bn, and basically then all got unloaded anyway). So, that worked out fairly well for B6. That’s unlikely to happen again in the case of not closing the B6+NK deal (there’s just no way for B6 to scale organically as fast as an NK purchase would allow). $3.6bn for NK (plus integration costs) yields a lot more airplanes / bases / pilots for only $1bn more than the VX sale would have been. So, from that standpoint, it’s a much better deal than the one they walked away from a few years ago.