Shares in Spirit Arlines plummet 60% after a Judge Blocks its Merger with JetBlue
Shares in Spirit Arlines plummet 60% after a Judge Blocks its Merger with JetBlue
By:Mike Butler
The plaintiffs said JetBlue planned to convert the combined company to the its model and charge customers more than the cost of an average Spirit Airlines ticket
- A court has blocked the merger of Spirit Airlines and JetBlue.
- Opponents said the deal would have made it more difficult to find affordable airfare.
- Spirit Airlines stock is down over 60% after the blocked merger.
- The stock market wonders what's next for shares in SAVE after a dramatic drop in price and sky high implied volatility.
A federal judge has ruled against the proposed merger of Spirit Airlines (SAVE) and JetBlue Airways (JBLU), sending SAVE stock tumbling to recent lows. The stock opened the week at $15.05 and now sits at $6.00, a new all-time low since its initial public offering (IPO) in May 2011.
The plaintiffs argued JetBlue planned to convert the combined company to the its model and thus charge customers more than the cost of an average Spirit Airlines ticket.
With the deal blocked, the low-cost airline is running out of options for a mutually beneficial pairing.
As you might imagine, implied volatility in Spirit Airlines is now through the roof, with almost a 200% implied move adjusted for the March 1 options expiration cycle. An implied volatility of 100% over the course of a year tells you the expected range of a stock is to go to $0.00 or double in price, so a 200% implied volatility puts SAVE in the meme stock category, where we could see double digit percentage moves.
SAVE stock is down more than 30% today, a day after approval of the merger was denied. With 69 million shares traded today, this stock is getting plenty of attention as investors and speculators decide where they stand with the stock.
JetBlue Airways' stock is also taking a tumble, down from a high of $5.45 on Jan. 16 to the current price of $4.70. The stock is down over 8% today alone. Interestingly enough, JBLU stock also has an implied volatility over 100% for the February 2024 options cycle, telling us both of these stocks should be very volatile over the next few months and beyond.
Mike Butler, tastylive director of market intelligence, has been in the markets and trading for a decade. He appears on Options Trading Concepts Live, airing Monday-Friday. @tradermikeyb
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