Spirit Airlines Plans to Accept Frontier’s $2.7 Billion Bid

SAVE is sinking this morning

After a drawn-out takeover battle, Spirit Airlines Incorporated (NYSE:SAVE) just announced that it plans on accepting Frontier Group’s (ULCC) improved cash-and-stock bid worth $2.7 billion, with a shareholder vote slated to take place on Thursday. While JetBlue’s (JBLU) latest offer sits at $3.7 billion, Spirit Airlines doubts that the merger between the two companies would be approved by regulators. At last check. SAVE is down 7.6% at $22.70. 

Spirit Airlines stock spent last week closing its early May bear gap, and finished Friday’s session at its highest level since late April. Should today’s losses hold, the equity could snap a five-day win streak — its longest in over a year. Year-to-date SAVE is up 4.4%. 

When we last covered Spirit Airlines stock, the shares were rising after an upgrade from J.P. Morgan Securities. Analysts still remain split on the stock, with five saying “strong buy,” and four saying “hold.” Meanwhile, short interest is shooting higher, up 20.5% in the last reporting period. Plus, the 10.42 million shares sold short make up a solid 9.6% of the stock’s available float. 

Options traders have remained optimistic. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock sports a 10-day call/put volume ratio of 7.89, which sits in the 70th percentile of its annual range. In other words, calls are getting picked up at a quicker-than-usual clip right now. 

What’s more, SAVE’s Schaeffer’s Volatility Index (SVI) of 62% sits in the relatively low 23rd percentile of its 12-month range. This means options traders are pricing in relatively low volatility expectations for SAVE at the moment. 

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