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Why Royal Caribbean, Carnival, and Norwegian Cruise Line Stocks Plunged Today

By Joe Tenebruso – Oct 13, 2020 at 1:20PM

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With its losses mounting, an industry leader is forced to ask investors for more cash.

What happened

Shares of Royal Caribbean (RCL 2.34%) sank on Tuesday after the cruise ship company said it was seeking to raise another $1 billion to fund its operations during the coronavirus pandemic. Fellow cruise ship operators Carnival (CCL 3.49%) (CUK 3.56%) and Norwegian Cruise Line Holdings (NCLH 3.17%) also fell on 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 sailing restrictions, Royal Caribbean has 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, those losses are set to grow even larger in the coming months. Royal Caribbean said that while it hopes to resume voyages by Dec. 1, it could "provide no assurance" that it will be able to restart its operations this year. 

A person with an outstretched hand is being handed money by another person.

Cruise ship companies are rushing to raise cash to shore up their battered balance sheets. Image source: Getty Images.

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

Now what

With COVID-19 case counts rising again in the U.S. and other parts of the world as we approach winter, it's possible that the Centers for Disease Control and Prevention (CDC) and other health officials could extend no-sail orders into 2021. That would place further pressure on the beleaguered cruise industry. And with Royal Caribbean, Carnival, and Norwegian Cruise Line Holdings all burning through vast amounts of their shareholders' capital, they could be forced to sell more stock and debt in the coming months, which would likely lead to further declines in their share prices.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool recommends Carnival. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Royal Caribbean Stock Quote
Royal Caribbean
$59.46 (2.34%) $1.36
Carnival Stock Quote
$9.64 (3.49%) $0.33
Carnival Corporation & Plc Stock Quote
Carnival Corporation & Plc
$8.73 (3.56%) $0.30
Norwegian Cruise Line Holdings Stock Quote
Norwegian Cruise Line Holdings
$16.41 (3.17%) $0.51

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

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