Jet Blue Case Ipo

The share price of $270,000 was significantly higher because the “fair value” as perceived by the dissenters, which accounted for the chance of an IPO. Taking into account the recently traded Kohler Co. share prices, the book value of a share, and the possibility of an IPO greatly inflated what the perceived value of each share should be. While Kohler believed their voting control and ownership structure would remain the same, the shareholders believed otherwise. Because shareholders assumed Kohler would go public, they argued for a higher valuation so as to receive the highest price, and thus profit, in the buyout.  So based on the highest MVE, we picked Masco as the comparable firm of choice. Using Masco’s MVE, $9838.8, and LTM EBIAT, $437.3, we solved for Masco’s P/E ratio, which was equal to 22.5. By multiplying the P/E ratio by Kohler’s LTM EBIAT (22.5 * $93.76), we projected a market value of $2,109,610,000.  To solve for estimated share price, we divided the projected market value by 7,587.89, the number of shares outstanding to obtain an estimated share price of $278,023.47. This estimate is near the $270,000 per share offer price.

If the company did go public, its share price should be $384.37 for per share with the rapid growth scenario.

The key external factors like the growth in the economy, disposable income, and fuel prices have negatively affected JetBlue. It was compelled to change its strategy several times and in 2011 had an income of $86 million down from $97 million in 2010. The growing consumer interest in leisure travel has positively affected JetBlue. The success of JetBlue has been attributed to growing consumer interest in leisure travel.

To find the cost of equity we used the formula rs = rRF + beta*MRP in which rRF2002 = 5.86% and the Market Risk Premium (MRP) = 5% as calculated by the Southwest Airlines finance department. We then calculated the beta for Southwest Airlines based on a regression analysis of five-year monthly returns on Southwest stock from January 1997 to January 2002, compared with the S&P 500 returns over the same period. This regression analysis indicated that Beta = .2219. Therefore,

Current market prices: Both McCaw and AT&T’s common shares are publicly traded. The market value of the equity can be summed with the book value of debt to give a rough estimate of the firm’s current value. The calculation that follows suggests a value for McCaw’s assets of about $10.5 billion. McCaw’s shares may be trading at a minority discount, because the CEO holds a controlling block of shares. To purchase a partial

The current enterprise value is $41,335 million and the equity value is $34,455 million. According to yahoo finance, the shares outstanding of our company are 647.31 million, so we can calculate the stock price for next year is $53.23. It will increase in following years.

The Cost of debt is determined by using the average of YTM of the 4 JetBlue debt instruments provided in Exhibit 4. The exact value is 6.91%, and a CAPM cost of equity is determined to be 10.50% using the risk-free rate, market risk premium and comparable beta from Southwest of 1.10. The cost of capital is determined to be 6.90%. Running the DCF analysis, JetBlue is currently valued at $2.7bn. Distributing equity value over the shares outstanding gives a share price of $66.51. This proposed price of the IPO is highly overpriced, considering that the underwriters have priced it within a range of $22-$24.

CEO John McDonough decided on making acquisition of Calphalon and Rubbermaid, which influent shareholders’ confidence.

The financing decision which is aimed at securing the purchase of the new 100-seat Embraer E190 aircraft would allow JetBlue to enter smaller markets while maintaining low operating costs, and increase flight frequency on existing routes. The low fares offered by JetBlue would allow it to attract new passengers who might otherwise not fly. Earnings from this market segment is expected to contribute to the profitability and positive financial performance of the company

As Star River is a private company and has not issued stock, we need to make several assumptions when calculating market value of equity and price of equity. Analysis of similar companies reveals that Wintronics, Inc. and STOR-Max Corp. are the most similar firms in the market. To calculate Star River’s market value of equity I used market to book value method. I found M/B for Wintronics to be 4.4 (market price per share/book value per share) and 3.9 for STOR-Max. an average M/B ratio is 4.15, so multiplying Star River’s book value of equity of 47004 by 4.15 I found Star River’s market value of equity to be SGD195,066.6M. Average beta of these two companies is 1.615. The global equity market premium is 6%, and I use 10 year Singapore T-bond yield of 3.6% as my risk free rate.

4. The article said that K12 was the closest comparable company to Rosetta Stone. Rosetta Stone is marketable to a larger consumer base than K12, so I think that it should be able to charge a higher IPO. The case said that book was more than 25 times oversubscribed during its road show which means Rosetta Stone could charge a much higher price. But these subscriptions are volatile and the economy is recovering, so a price too high could deter many investors. For my analysis I took the EBITDA margin for years 2006-2008 and found the average increase during that time to be 9.93%. I then took the estimated share value from 2008 and multiplied it by 1.0993 to factor in the average increase in share value. This resulted in a price of $19.22. Given this number I would increase the current range from $15-17 to $19-24. The reason for the increased range is because of the

To support their growth and offset portfolio losses by their venture capital investors, management was ready to raise additional capital through a public equity offering.

In this way we get the discount rate. Then we should calculate the value of CCFs for every year. Capital cash flows consists of two parts: the first is FCFF and the second is interest tax shield. Owing to different cash flow characteristics in U.K. and U.S. mentioned before, we should calculate FCF of BT Yellow Pages and FCF of Yellow Book USA separately. For the interest tax shield, we don’t know about the debt proportion for a specific business, but we only know the total debt. Since the debt financed would first flow into Yell Group, the parent company in U.K., we may assume the whole interest tax shield in U.K..

Although Blaine’s current financial situation is sound with no debt, its current balance sheet is under levered and over liquid

JetBlue was established in 1999, and was the third airline start-up for founder and CEO David Neeleman. Neeleman managed to gather $130 million, the most ever raised for a start-up airline, from investors that included Chase Capital and financier George Soros. With the large start-up capital he purchased new Airbus A320 jets equipped with satellite TV, a first in the industry. In 2004 the company ordered an additional 30 new A320 aircrafts from Airbus. The airlines first flight was from New York to Fort Lauderdale in 2000. During the year, the airline added nine more destinations in California, Florida, New York, Utah, and