At first glance, today looked almost "normal" for cruise line stocks. With the S&P 500 roughly flat, but optimism growing that cruise lines will be able to slowly resume sailing in a month or so, shares of Carnival (CCL -2.15%) and Royal Caribbean (RCL -0.85%) were both modestly higher early today, up about 1% apiece.
But in contrast to its peers, shares of Norwegian Cruise Line Holdings (NCLH -1.23%) were down 6% at 10:20 a.m. EST on Wednesday.
Late last night, Norwegian announced plans to sell 40 million new shares at $20.80 each. The company says it intends to use the money for "general corporate purposes," but I think we all know what that really means: Norwegian needs the cash to stay afloat while it cannot collect revenue from carrying passengers but still has to pay the bills on all the boats it floats.
The company hopes this offering will win it enough momentum (and enough cash) to coast through the tail end of the recession.
Will it? Before fees and costs, Norwegian's stock offering should raise $832 million for the beleaguered cruise line.
At last report, Norwegian was burning through $175 million in cash per month. That's a faster rate of cash burn per ship than either Carnival or Royal Caribbean. Still, even assuming Norwegian is unable to reduce its rate of cash burn (the opposite may be more likely, as Norwegian spends more to prepare for a resumption of cruising), the extra money should buy Norwegian another four to five months' breathing room. Added to the $2.4 billion the company had at last report, Norwegian should soon have about 18 months of cash available to it.
On the downside, it's going to have to dilute its existing shareholders by about 14.5% to accomplish this. And that's the real reason investors are selling off Norwegian Cruise Line stock today.