A good valuation of the I.P.O. share offering will leave money on the table. In addition to that loss, JetBlue will have to pay legal, accounting, and underwriting fees associated with public offerings. Is it worth it?From an operation perspective, the I.P.O. supplies capital to JetBlue which the firm can use to increase competitiveness and support aggressive growth.From a financing perspective, JetBlue investors will gain access to a more liquid equity market which will
reduce JetBlue’s cost of capital
from the much higher cost of private equity. Additionally, the new equity will lower the debt to equity ratio. With a lower debt to equity ratio, JetBlue will then have increased access to the debt market with more favorable terms. The ability to access more debt can then be used to again decrease the cost of capital by altering the capital structure of JetBlue to take advantage of the tax advantages provided by debt financing. The tax shield of the debt financing will increase the enterprise value of the company.