Frontier Airlines IPO — $570 Million Raised at $4 Billion Valuation

By Adriaan Brits Thursday, April 1, 2021

Frontier Group Holdings, which owns Frontier Airlines, announced it sold 30 million shares at $19 per share to rake in $570 million via its IPO (initial public offering).

A Frontier Airlines plane on the runway.

Shares Sold at a Bottom End

Frontier Airlines, a Colorado-based ultra-low-cost carrier, sold 30 million shares at $19 per share, which is at the bottom end of a marketed range of $19 - $21. Out of 30 million shares sold via IPO, the airline business sold 15 million shares, while the existing shareholders and business investors sold 15 million shares.

Banking business titans, namely Citigroup, Barclays, Deutsche Bank Securities, Morgan Stanley, and Evercore ISI, acted as lead bookrunners for the IPO. Under the terms of the IPO, underwriters — financial banks that act as brokers between the issuer and buyers — have a 30-day option to buy an additional 4.5 million shares at the IPO price.

Frontier Airlines is expected to receive net proceeds of roughly $266 million after the IPO costs are deducted. Furthermore, the low-cost airline company said it will not receive any proceeds from the sale of the shares by shareholders and investors.

William Franke, the Chairman and biggest shareholder of the company, planned to offload 14.2 million of the shares. If he exercised his option, Franke is likely to have generated almost $270 million. At $19 a share, Frontier Airlines has a business validation of roughly $4 billion.

Shares of the company will start trading today on the Nasdaq stock exchange under the ticker symbol “ULCC,” which stands for the ultra-low-cost carrier. Frontier Airlines previously filed for an IPO in 2017, but it withdrew its application.

Frontier Airlines hopes to capitalize on the expected surge in demand for travel in summer as the US ramps up its vaccination efforts. The airline business is expecting that Americans will opt for short-distance trips even before summer, as the work-from-home regime is still very much in place.

“We plan to strategically deploy our capacity where demand is highest during the recovery. More broadly, after being restricted from travel, we believe many customers will take advantage of the opportunity to travel more in the coming years,” the company said in a filing.

The low-cost company has filed for an IPO again this year after witnessing the success its rival, Sun Country, had in its IPO that took place earlier this month. Shares of the low-cost company soared over 50% on the stock market debut two weeks ago.

“For the first time since the Covid crisis came we’ve been able to get sales back to what they were at pre-Covid levels, so we’re feeling really good about a recovery,” Sun Country CEO Jude Bricker told CNBC.

Sun Country raised $248 million from its IPO after selling almost 9.1 million shares at $24 per share. It previously marketed a range of $21 to $23. Two weeks later, Sun Country stock price trades at $34.28, which is 42.8% higher than the IPO price.

Summary

Low-cost carrier business Frontier Airlines divested 30 million shares at $19 per share to generate $570 million for about a $4 billion business valuation.

About the Author


Headshot of Adriaan Brits

An analyst of global affairs, Adriaan has an MSC from Oxford, with diverse interests in the digital economy, entertainment, and business. He is a specialist trainer in advanced analytics and media.

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