Please ensure Javascript is enabled for purposes of website accessibility

Norwegian Cruise Line Goes for Quick Cash Grab With $30 Stock Offering

By Rich Duprey - Mar 5, 2021 at 11:20AM

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

Proceeds will be used to repay some of the debt it took on last year.

Cruise ship operator Norwegian Cruise Line Holdings (NCLH -1.31%) sought to take advantage of a rebound in its stock price with a public offering of 47.58 million shares.

The cruise operator's ships are still stuck in port, but its stock has quadrupled from its year-ago low point on hopes of returning to the high seas soon. Shares have nearly doubled in the past six months and are up 50% over the past month.

Yet because Norwegian priced its offering at $30 a share, an almost 10% discount to where shares had closed the day before, the cruise line stock was sinking 11% on the news.

Life preserver tied to railing

Image source: Getty Images.

Capitalizing on an opportunity

While the offering is not a bad move by Norwegian because it ensures the cruise ship operator can raise a lot of money quickly -- there's also an additional 5 million share over-allotment as well -- it does amount to a serious dilution of existing shareholders as the offering represents over 15% of Norwegian's outstanding stock.

Norwegian says it plans to use the proceeds from the offering to repurchase debt issued by a subsidiary that's due in 2026. The notes were issued last May by L Catterton in a private placement in the amount of $400 million. L Catterton is the world's largest consumer-focused private equity firm.

The notes were issued as Norwegian came to grips with the COVID-19 pandemic, a crisis that caused it to subsequently take on billions of dollars of debt to stay afloat.

Norwegian's debt load ballooned to over $11.6 billion, though it also has over $3.3 billion in cash. That should keep it operational until it finally gets the green light from health authorities to begin sailing again.

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

Norwegian Cruise Line Holdings Ltd. Stock Quote
Norwegian Cruise Line Holdings Ltd.
$15.10 (-1.31%) $0.20

*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 service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/23/2022.

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.