Sun Country Airlines surged nearly 45% during the first hour of its stock market debut this morning.
Shares rose from a listing price of $24 to around $35, after trading in them began around 11 a.m. on the Nasdaq Stock Market.
The Minnesota airline’s story resonated with Wall Street’s largest institutional investors, which allowed the company and its underwriters to price the shares above its initially marketed range of $21 to $23.
The $218.2 million Sun Country raised from the listing will be used to immediately pay off its $46-million CARES Act loan, executives said. The rest of the proceeds will go to buy new airplanes, hire more workers and grow the airline.
“It doesn’t go toward financing losses,” Jude Bricker, Sun Country’s chief executive, said in an interview Wednesday. “We are making money now and we are cash flow positive.”
Executives took more than 70 virtual meetings with investors on its two-week roadshow. They received more requests for allocation of initial shares than they could satisfy with the offering.
“The reception was awesome. The number of orders was many times over the number of shares that were on sale, so we saw an opportunity to take the price up a little bit,” said Dave Davis, president and chief financial officer at Sun Country. “We think we have some really blue-chip shareholders in the stock, so very, very pleased.”
Davis, an industry veteran, was CFO of Northwest Airlines during its merger with Delta in 2008, which was the last time Minnesota had a publicly-traded airline.
Investors are eyeing industries, including tourism, that were hurt by the coronavirus pandemic.
Competitor Frontier Airlines last week resurrected its IPO plans that it had put on ice in 2017.
Sun Country’s unusual business model — with its three revenue streams of cargo, commercial and charter — allowed it to outperform the industry during the pandemic.
“The objective here wasn’t just to create a third or fourth version of an ultralow-cost carrier. We wanted to create something sort of unique,” Davis said. “We saw that begin to work in 2019 when we posted some pretty nice (financial) results. And then in 2020, our outperformance made it really evident that this model is really unique, that this model is resilient and can work.”
While its peers were hemorrhaging cash throughout 2020, Sun Country was able to pick up more contract cargo flying last summer, including for Amazon with which it penned a fortuitous deal a few months before the pandemic hit.
“We signed that deal at the end of year and everyone was kind of thinking we were crazy,” Bricker said.
By last July, he said, “we got really excited … and we started thinking, ‘Hey, let’s do this,’ and we started thinking about taking advantage of our outperformance.”
The company finished 2020 with a net loss of just $3.9 million. Revenue fell 43% from the previous year.
Kristen Leigh Painter • 612-673-4767