Frontier Airlines stock fell in its trading debut on Thursday, after its initial public offering priced at the low end of its expected range.
Shares closed down 0.8% at 18.85 on the stock market today as oil prices jumped after the OPEC+ meeting. The Denver-based ultra-low-cost carrier on Wednesday priced 30 million shares at $19 apiece. Last month, Frontier Airlines (ULCC) said it expected to price those shares at between $19 and $21.
The offering announced Wednesday consisted of 15 million shares offered by Frontier that will give the company around $266 million in net proceeds. Another 15 million will be sold by certain existing shareholders, but Frontier won’t receive proceeds from those.
A selling shareholder has also granted the underwriters a 30-day option to buy an extra 4.5 million shares of Frontier Airlines stock.
In going public, Frontier hopes it can ride the rebound in travel demand following the coronavirus pandemic. But it will join a sector that was often punished by investors even during the good times, when the costs associated with expansion plans could send shares reeling.
The Frontier Airlines stock debut comes not long after that of Sun Country‘s (SNCY), a rival ultra-low-cost carrier that went public last month. But that debut follows a brutal year for airline stocks and the travel industry as a whole, after the pandemic canceled vacation plans and relegated business travel to Zoom Video (ZM) meetings.
Frontier Airlines Stock, Other Airline Stocks
Frontier Airlines stock joins IBD’s Transportation-Airline industry group. That group’s ranking currently stands at No. 23 out of 197 tracked.
Known for the pictures of wildlife that appear on its jets’ tail fins, Frontier filed for an IPO in 2017. But it withdrew the offering last summer.
Frontier last year said it burned an average of roughly $2 million in cash per day last year. Revenue at that time was $1.25 billion, well down from the prior year. It reported a net loss of $225 million last year.
But the airline industry has broadly seen a rebound in demand over recent weeks. Deutsche Bank, in February, said the airline industry was “back on track,” and poised to gain from pent-up air-travel demand and U.S. consumers that had saved around $1.5 trillion in extra cash since the pandemic started.
However, coronavirus cases, after falling at the beginning of the year, are beginning to rise again, as the U.S. economy reopens. Officials have warned of potentially more contagious variants of the virus, even as more of the population gets vaccinated.
Follow Bill Peters on Twitter at @IBD_BPeters.
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