Minneapolis-based Sun Country is planning on going public, and the timing sure is going to raise some eyebrows…
In this post:
Sun Country’s plans to go public
Sun Country has filed with the US Security and Exchange Commission relating to a proposed initial public offering (IPO) of its common stock, as the airline hopes to raise at least $100 million through this. Sun Country is owned by Apollo Global Management, which is a huge global asset management firm.
Sun Country intends to trade on Nasdaq with the ticker symbol “SNCY.” The number of shares offered and the price range of the proposed offering has not yet been determined.
Plans for Sun Country to go public predate the pandemic, as Sun Country had already been discussing this in mid-2019, with plans to go public in April 2020.
Understandably the IPO was put off, since that would have been terrible timing unless the company’s financial situation was truly dire. While airline stocks have recovered considerably, it’s still interesting that Sun Country thinks now is a good time for an IPO.
Sun Country has been quite resilient
Since Sun Country isn’t publicly traded, we don’t have quite as much information about the carrier’s performance compared to peers. However, by all accounts the airline seems to be doing relatively well:
- Sun Country was allegedly profitable in the summer of 2020
- Sun Country operated as many flights in October 2020 as in February 2020
- Sun Country has been successful during the pandemic with charters for sport teams and casinos, and the company has also started operating cargo services for Amazon
In 2017, Sun Country underwent a significant transformation, as the airline went from a full service airline to an ultra low cost airline. With this, Sun Country eliminated first class, crammed more seats into planes, started charging for carry-ons, and more.
While consumers were mostly sad to see this transformation, ultimately it seemed to work out quite well for the airline financially.
Bottom line
Sun Country intends to go public, as the airline hopes to raise at least $100 million through its IPO.
Based on what we know, Sun Country has been rather resilient and creative throughout the pandemic, between its charters and its Amazon cargo business. Sun Country significantly adjusted its business model in 2017, and that has worked out quite well.
Nonetheless it seems like a gutsy time for an airline to go public, so this will be worth watching. Perhaps Sun Country thinks that its relative success compared to other airlines during these tough times makes it a good time to go public.
What do you make of Sun Country’s planned IPO?
@Lune and @Scudder - I guess Spirit was an anomaly then? They also had a similar story with Indigo.
@Scudder, you nailed it. My advice is don't ever buy anything that's been through the private equity strip mining process. No doubt they've been buffing the numbers (likely fraudulently) for the past 1-2 years to pump this IPO, but the truth is that anything of value in this company was stripped out, sold for profit (to Apollo), with the carcass of the company loaded with as much debt as pension funds were conned into buying,...
@Scudder, you nailed it. My advice is don't ever buy anything that's been through the private equity strip mining process. No doubt they've been buffing the numbers (likely fraudulently) for the past 1-2 years to pump this IPO, but the truth is that anything of value in this company was stripped out, sold for profit (to Apollo), with the carcass of the company loaded with as much debt as pension funds were conned into buying, and now they're looking to unload this turd to a greater fool before it comes crashing down.
The reason they're doing the IPO now is probably because they can no longer keep the numbers looking good and/or the debt is about to blow up this whole thing soon, so they need to get out now.
That sounds harsh but study after study has shown that companies exiting the private equity realm significantly underperform their market peers. Anyone buying into this IPO, be prepared for "surprises" to come out in the next year or two, and likely a bankruptcy filing in under 5.
Apollo Global Management is a Private Equity firm, so if they’re following the SOP of that sector, they’ll have stripped the company of all its assets, loaded it with debt, pumped up short-term profit reports, and is making a killing by selling off a doomed turd or a company.
Don't bet against Jude Bricker when it comes to growing a ULCC without compromising profits. Just look what he did at Allegiant.
Anyone know if there are plans to add other hubs/focus cities outside of MSP?
Given they're far, far reliant on business travel and if they can be nimble like Allegiant Sun Country might do well. They seem to have a niche but as always Wall Street will want them to expand beyond their niche. Can they do it profitability with a bunch of airlines squabbling over what surely will be a smaller customer base for at least a year or two to come?
"Since Sun Country isn’t publicly traded, we never know quite as much about how the airline is performing compared to some of its peers." - you
We actually do know, if you'd actually read the S-1 filing you'll see earnings have been well ahead of it's peers. While earnings per share dropped from $16.22 in 2019 to $1.62 in 2020, they're still in the green, which is more than what can be said about all...
"Since Sun Country isn’t publicly traded, we never know quite as much about how the airline is performing compared to some of its peers." - you
We actually do know, if you'd actually read the S-1 filing you'll see earnings have been well ahead of it's peers. While earnings per share dropped from $16.22 in 2019 to $1.62 in 2020, they're still in the green, which is more than what can be said about all of the other U.S. domestic airlines that have filed there annual reports thus-far this year.
The 2019 numbers of $16.22 are fantastic relative to the industry, and that was before Amazon came on board. All things considered, Sun Country has proven their model and market are industry leading in both good and bad times. In my opinion, their stock will perform above average, but more likely they'll be an aquisition target too juicy to pass up.
I think Frontier will be putting themselves in an advantageous position when they take deliveries of the a321 xlr. If they start offering one way $59 barebone fares to Hawaii it could be fierce competition.
While there is risk and it’s gutsy for sure it makes sense. With Reddit investors helping American Airlines a little these past few months it is actually a great time to try to raise capital. I bet that the stock rises significantly after its IPO. (But this is a bet because that’s what a lot of the stock market has become). After the initial hype it will drop back down to earth a little.
Regardless...
While there is risk and it’s gutsy for sure it makes sense. With Reddit investors helping American Airlines a little these past few months it is actually a great time to try to raise capital. I bet that the stock rises significantly after its IPO. (But this is a bet because that’s what a lot of the stock market has become). After the initial hype it will drop back down to earth a little.
Regardless if the intent is to raise capital this will work for them. It will also probably see profits for investors and institutional owners as a result of the IPO.
Flying out of MSP, Sun Country is a bit player at best. I am surprised they have not been swallowed up by Southwest or another carrier. They don't have the best reputation in the market and the area (did those passengers ever get back from Mexico?) so I am dubious. I guess an IPO can be had for an airline that is run out of it's garage - this offices for the airline moved into...
Flying out of MSP, Sun Country is a bit player at best. I am surprised they have not been swallowed up by Southwest or another carrier. They don't have the best reputation in the market and the area (did those passengers ever get back from Mexico?) so I am dubious. I guess an IPO can be had for an airline that is run out of it's garage - this offices for the airline moved into their hanger at MSP. I am dubious but if it works, great. I still see no reason to fly with them.