KEY BISCAYNE, Fla. — J.P. Morgan Chase & Co., among the first investors in JetBlue Airways Corp., helped "crater" the airline's stock by dumping shares after the initial public offering, a JetBlue executive said.
"They behaved as though they had never been involved in an IPO before in their lives," JetBlue Chief Financial Officer John Owen told investors at a conference here. "It was quite embarrassing for us to see what they did."
J.P. Morgan, the biggest U.S. private equity investor and second-largest U.S. bank, sold 2.4 million JetBlue shares on Oct. 9, the first day the bank was allowed to sell after the IPO, Owen said. JetBlue shares tumbled 16 percent that day to their lowest level since the public offering.
J.P. Morgan's private equity unit, which lost $1.1 billion before taxes in the first nine months of the year, has been paring its stock holdings in recent months. The bank has had profit declines in seven of the past eight quarters.
"We informed the company that it was our intention to obtain liquidity soon after the IPO was concluded," Jeffrey Walker, managing partner of the bank's JPMorgan Partners unit, said in an e-mailed statement. "We wanted to sell parts of our position in an orderly fashion such that the stock price was not adversely affected, and we feel that we were successful in this endeavor."
After the October sale, the bank sold another 1.7 million shares of JetBlue stock last week and has about 500,000 shares left, Owen said.
"Frankly, we can't wait until they get rid of the last 500,000," said Owen. "We are tired of them messing with our stock price."
The airline, which puts televisions in the backs of its all-leather seats and is led by Utah native David Neeleman, sold shares to the public in April, raising $158.5 million. Demand for the shares was so great that the company twice had to boost the airline's offering price before selling at $27 a share. The offering was managed by Morgan Stanley, Merrill Lynch & Co., Raymond James Financial Inc. and UBS Warburg LLC.
The stock rose to as high as $54.50 in May before dropping to its low this year of $30.15 on Oct. 9, when the airline's original investors were first allowed to sell shares. Initial public offerings typically come with "lock-up periods" during which early investors can't sell. JetBlue shares fell 95 cents Friday to $37.85.
"They barged into the market and dumped the maximum they could dump at the time," Owen told investors. "We're frankly not pleased at all with the way Chase behaved."
JetBlue is also part-owned by investor George Soros' Soros Private Equity Partners, which still holds its 6.4-million-share stake, and Weston Presidio, which distributed half its 7 million shares to its limited investors, who in turn sold about half that amount, Owen said.
J.P. Morgan first invested in JetBlue in 1996 and ultimately committed $20 million to the airline. By the end of the third quarter, its stake was worth $139 million on the stock market, the bank said.
"We think JetBlue has an excellent management team," Walker said. "We are proud of the fact that we were able to be part of the group that provided them with the funding to get off the ground."