Please ensure Javascript is enabled for purposes of website accessibility

Why OneSpaWorld Stock Skyrocketed Today

By Evan Niu, CFA – Apr 30, 2020 at 1:52PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company received a $75 million investment to stay afloat.

What happened

Shares of OneSpaWorld (OSW -0.33%) have skyrocketed today, up by 23% as of 12:40 p.m. EDT, after the company announced that it had received a $75 million investment. OneSpaWorld's largest current shareholder, Steiner Leisure, will provide a cash infusion to help prop it up.

So what

OneSpaWorld, which operates spas and wellness centers on cruise ships and at destination resorts, has been hit hard by the coronavirus outbreak that has shut down the vast majority of discretionary travel worldwide. The company said last month that it had furloughed 96% of workers at destination resorts in the U.S. and Caribbean, and repatriated 25% of all cruise ship employees. OneSpaWorld also suspended its dividend program in order to preserve cash.

Cruise ship at sea at dusk

Image source: Getty Images.

Steiner Leisure has agreed to purchase 18.8 million common shares for $75 million, which represents a modest 5% premium over the past few weeks. At the lows set in March, the stock had lost 85% of its value this year. OneSpaWorld will also issue 5 million warrants to Steiner Leisure that have an exercise price of $5.75. Those warrants will be good for five years and the company can redeem them if and when its shares increase to $14.50.

Now what

Steiner Leisure will also get more representation on OneSpaWorld's board, securing three of 10 seats. OneSpaWorld will use the proceeds for general corporate purposes. The company finished 2019 with just $13.9 million in cash and cash equivalents on the balance sheet -- less than accounts payable and other accrued expenses at the time.

The company has now repatriated 45% of all cruise ship employees and is working to bring "substantially all" remaining workers home as soon as possible. Following the investment, OneSpaWorld says it can stay afloat for over two years because it has reduced its monthly cash burn rate to $3.6 million including debt service.

Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

OneSpaWorld Holdings Limited Stock Quote
OneSpaWorld Holdings Limited
OSW
$8.97 (-0.33%) $0.03

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.