Shares of major cruise lines widely tanked on Thursday after Carnival announced a $1 billion stock sale—its second capital raise in recent months—in order to pay down debt, as the cruise industry continues to feel the impact of the Covid-19 pandemic, surging inflation and higher fuel prices.
Shares of major cruise operator Carnival fell nearly 12% on Thursday after the company said it would sell $1 billion worth of stock—just over 102 million shares—at $9.95 per share, with the option to buy an additional 15.3 million shares.
In what is Carnival’s second capital raise since a debt offering in May, the company said it “expects to use the net proceeds from the offering for general corporate purposes, which could include addressing 2023 debt maturities.”
Carnival ended the second quarter with roughly $35 billion in debt—more than its peers—and $7.5 billion in cash, but analysts warned last month that could “quickly shrink” if customer demand takes a hit in the form of fewer bookings and more canceled deposits .
Rivals Norwegian Cruise Line and Royal Caribbean Cruises saw their stocks fall over 8% and nearly 9%, respectively, as the news spooked investors.
The move to raise more money will likely lead to more questions about the health of the cruise business, according to a recent note from Stifel analysts, who say that the stock sale will dilute existing shareholders’ stakes by around 8.5%.
Despite the negative headline, the firm believes that Carnival is instead being “proactive” and trying to get ahead of debt payments that are due next year, at which executives have hinted in previous quarters.