NEW YORK (AP) -- Shares of Spirit Airlines Inc. fell Tuesday after the company announced that Chairman William Franke and another director will resign and their investment firm, Indigo Partners LLC, will sell its stake in the low-fare carrier.
Spirit shares were down $2.75, or 7.8 percent, to $32.64 in midday trading. They had doubled in price this year going into the session.
Analysts were divided on the significance of Indigo's exit. A Citi analyst downgraded Spirit shares, saying that Indigo's plan to sell nearly 17 percent of Spirit's stock will create risk for the shares. But a Cowen and Co. analyst said nothing has changed at Spirit, and an Indigo-fueled sell-off could create a buying opportunity.
Spirit announced after the market closed on Monday that funds affiliated with Indigo would sell their 12.1 million shares to the public and that Franke and director John R. Wilson planned to resign at the company's Aug. 7 board meeting. The airline said it expects that H. McIntyre Gardner, a retired Merrill Lynch executive and a Spirit director since 2010, will become chairman.
Franke is Indigo's managing partner and has been Spirit's chairman since 2006, before the company went public. Wilson is a principal at Indigo and has been on Spirit's board since 2009.
Published reports have tied Indigo to an interest in buying Frontier Airlines, which is being sold by Republic Airways Holdings Inc. Last week, Republic Chairman and CEO Bryan Bedford said that his company had signed a nonbinding term sheet to sell Frontier. He said the deal had conditions, he couldn't guarantee it would be completed, and he declined to identify the potential buyer.
Republic officials declined to comment Tuesday on Spirit's announcement.
Citi downgraded Spirit to "Neutral" from "Buy" and reversed a $4 increase it made last week in the target price for the shares. Analyst Stephen Trent said in a note to clients that divesting a stake as big as Indigo's would create "significant overhang risk" for other investors. He added, however, that Spirit remains attractive as a long-term investment.
Cowen analyst Helane Becker maintained an "Outperform" rating. "We do not believe anything fundamental has changed at Spirit and believe investors looking for an entry point should look today as we believe the shares will sell off this morning," she wrote in a note to clients.
Spirit, based in Miramar, Fla., has profited with a strategy of charging low fares but tacking on fees for many extra services that are free on bigger airlines, from soft drinks to carrying a bag on board.