Why stocks of Royal Caribbean, Carnival and Norwegian Cruise Line plunged today


What happened

Actions of Royal Caribbean (NYSE: RCL) sank on Tuesday after the cruise line said it was seeking to raise an additional $ 1 billion to fund operations during the coronavirus pandemic. Cruise companions Carnival (NYSE: CCL) (NYSE: CUK) and Norwegian Cruise Line Holdings (NASDAQ: NCLH) also came across the news.

As of 10:40 a.m. EDT, Royal Caribbean, Carnival and Norwegian Cruise Line Holdings were down 10%, 6% and 6%, respectively.

So what

With most of its fleet unable to leave port due to COVID-related navigation restrictions, Royal Caribbean suffered heavy losses during the coronavirus crisis. In just the first six months of 2020, it generated a net loss of $ 3.1 billion.

Unfortunately, these losses are expected to increase further in the coming months. Royal Caribbean has said that while it hopes to resume travel by December 1, it could “give no assurances” that it will be able to resume operations this year.

Cruise lines are rushing to collect cash to shore up their struggling balance sheets. Image source: Getty Images.

In this context, Royal Caribbean announced a $ 500 million share offering and a $ 500 million senior convertible note sale. The capital increase will help the struggling company stay afloat for the time being, but it will further dilute shareholders, many of whom have suffered brutal losses in the past year.

Now what

With the number of COVID-19 cases increasing again in the United States and other parts of the world as winter approaches, the Centers for Disease Control and Prevention (CDC) and others may Health officials can extend the sailing ban orders until 2021. are putting additional pressure on the ailing cruise industry. And with Royal Caribbean, Carnival and Norwegian Cruise Line Holdings all burning off large amounts of their shareholders’ capital, they could be forced to sell more stocks and debt in the coming months, which would likely lead to further declines in the market. price of their shares.


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