Cruise line stocks are taking on water as 2021 gets under way, with shares of Norwegian Cruise Line Holdings (NCLH -7.45%) falling 7.2% in 11:15 a.m. EST trading, Carnival Corporation (CCL -2.77%) (CUK -2.91%) down 7.1%, and Royal Caribbean (RCL -3.26%) off 5.6%.
Curiously, although it's suffering least of any of the three major cruise lines, Royal Caribbean may be most to blame for the sell-off.
On Dec. 31, 2020 (and after close of trading for the day such that no one would be able to trade on the news until today), Royal Caribbean made an 8-K filing with the SEC.
In that filing, Royal Caribbean informed that it had just sold 13 million shares of stock in an "at-the-market" secondary stock offering, and has now exhausted its quota of shares authorized for sale. The company noted that it raised $1 billion in gross proceeds from the sale, before deduction of fees and costs, and intends to use the monies for general corporate purposes.
Royal Caribbean needs this cash. The company has previously disclosed that it continues to burn cash at the rate of about $270 million per month -- but Royal Caribbean isn't the only cruise company in dire straits, and it's probably not going to be the last to sell shares this year.
Carnival Corporation, with a bigger fleet to sustain, is reported to be burning cash at nearly twice Royal Caribbean's rate. Norwegian, with a smaller fleet, is burning cash at the highest rate per ship at $175 million per month.
How long can these companies remain afloat at these burn rates? According to data from S&P Global Market Intelligence, Carnival had $8.2 billion in cash at the end of August. It has since raised $8.1 billion more through a combination of stock and debt offerings. Thus, even after four months of burning cash at the rate of $530 million a month, Carnival probably has on the order of $14.2 billion available to it, and is well positioned to survive for another two years at least, even absent any new revenue coming in.
Royal Caribbean had $3 billion at the end of September, and counting the stock sales just reported, has raised another $2 billion since. Minus three months of burning cash, Royal Caribbean probably has about $4.2 billion left -- good for about 15 months.
Finally, Norwegian had $2.4 billion at the end of September, and has raised $1.7 billion more over the last three months. Minus three months of cash burn, it should have $3.6 billion in the bank today. That's the least cash of any cruise line, but still sufficient to keep it afloat for 20 more months.
Long story short, even after its New Year's Eve stock sale, Royal Caribbean's cash position is the most tenuous. The fact that its stock is going down least of any of the three major cruise companies today makes little sense to me.