What happened

The two rival bidders for Spirit Airlines (SAVE -2.90%) continue to jockey for control of the discounter, but at least on Monday, it wasn't translating to a higher stock price. Shares of Spirit traded down more than 8% as investors bet that the lower bid for the company would win out in the end.

So what

A six-month tussle between Frontier Group Holdings (ULCC -5.36%) and JetBlue Airways (JBLU -3.12%) is going down to the wire, and neither side is showing any sign of giving up. Frontier and Spirit announced plans to combine back in February, but in April, JetBlue stepped in with its own hostile offer at a higher price.

JetBlue is offering $33.50 per share in cash for Spirit, while Frontier has offered a combination of cash and stock currently valued at about $22.38 per share. But Spirit's board has concluded the Frontier deal is the only one that can get past regulatory scrutiny, and has recommended holders approve that offer at a special meeting scheduled for Thursday.

On Monday, Frontier delivered its closing argument in the form of an open letter to Spirit shareholders. The airline noted that while the present value of its offer is lower, the stock component means "stockholders can realize significant upside from merger synergies."

Investors seem to be betting that Frontier's argument will win out, with Spirit shares falling to a level in line with the Frontier bid and well below what JetBlue had offered.

Now what

It's worth noting that this is the second time Spirit has tried to hold its special shareholder meeting, with an earlier date postponed after JetBlue sweetened its offer. It is possible another extension could be in the cards, but for now at least, it appears the most likely outcome is a Spirit vote to approve the Frontier offer.

There's no easy choice for investors. JetBlue's all-cash offer carries more regulatory risk but a higher price; Frontier's stock component does offer post-merger upside but also carries post-merger risk. Airline merger integrations are no easy task, and with investors increasingly concerned there could be a recession up ahead, it could take years for the benefits of the merger to fully materialize.

Given the sell-off in Spirit shares, investors appear to be predicting that whatever twists are up ahead, the upside from here is limited.