What happened
Shares of OneSpaWorld (OSW -0.64%) 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.
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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.
