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Cruise lines were given a boost earlier this week after the Centers for Disease Control and Prevention lifted more Covid rules for ships.
Daniel Slim/AFP via Getty Images
Carnival
Shares are falling on Thursday after the company said it would sell $1 billion in new shares just months after raising $1 billion by selling bonds.
Carnival shares have fallen 12.5% to $9.69 per share in early trading. The company is selling the new shares at $9.95.
Carnival (ticker: CCL ) said it would use the proceeds for general corporate purposes, which could include paying down debt maturing in 2023.
Goldman Sachs
(GS) is acting as sole book keeper.
Investors have reason to be unhappy. The sale will dilute shareholders by about 8.5%, writes Stifel analyst Steven Wieczynski, many of whom likely assumed the company would not need to raise more money after May’s debt offering. He notes that the offer will raise even more questions, especially if the cruise business is deteriorating. Wieczynski, however, explains that the offer is likely a way to meet debt due in 2023, something it has said it would do in previous quarters.
“When we saw the headline, we knew right away that investors would panic and assume that every cruise-related name would probably also be looking to raise capital at some point in the near future,” Wieczynski writes. “However, after speaking with CCL management about the proposed equity transaction, it is very clear to us that this increase is being made to be more proactive versus anything else.”
Carnival did not immediately respond to a request for comment.
The fundraising comes shortly after the Centers for Disease Control and Prevention ended requirements for cruise lines to report the number of Covid cases on ships, as well as testing and vaccination rules for passengers.
While cruises are still bound by testing rules at each individual port or country, raising the requirements was seen as a major step towards a return to a pre-pandemic normalcy for the industry. carnival,
Royal Caribbean
(RCL) and
Norwegian Cruise Line Holdings
(NCLH) won earlier this week in the news.
They don’t win today. Royal Caribbean is down 7.3%, while Norwegian is down 7.7%.
Royal and Norwegian did not immediately respond to a request for comment.
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