Carnival Stock Tumbles After New Share Sale. What the Market Is Worried About.

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Cruise liners were given a boost earlier this week after the Centers for Disease Control and Prevention lifted more Covid rules for ships.

Daniel Slim/AFP via Getty Images


stock was tumbling Thursday after the company said it would sell $1 billion of new stock just months after raising $1 billion dollars by selling bonds.

Carnival stock has dropped 12.5% to $9.69 a share in early trading. The company is selling the new shares at $9.95.

Carnival (ticker: CCL) said it would use the proceeds for general corporate purposes, which might include paying off debt maturing in 2023.

Goldman Sachs

(GS) is acting as the sole bookrunner.

Investors have reason to be displeased. The sale will dilute shareholders by around 8.5%, writes Stifel analyst Steven Wieczynski, many of whom likely assumed that the company would not need to raise more money following May’s debt offering. He notes that the offering will raise even more questions, particularly around whether the cruise business is deteriorating. Wieczynski, though, explains that the offering is likely a way to get in front of debt coming due in 2023, something it has said it would do in previous quarters.

“When we saw the headline we knew immediately investors would panic and assume that any cruise-related name would probably be looking to raise equity as well at some point in the near-future,” Wieczynski writes. “However, after talking with CCL management about the proposed equity transaction, it is veryclear to us that this raise is being done to be more proactive versus anything else.”

Carnival did not immediately respond to a request for comment.

The fundraising comes just after the Centers for Disease Control and Prevention ended requirements for cruise lines to report the number of Covid cases on ships, as well as rules for testing and vaccination for passengers.

While cruises are still bound by testing rules in each individual port or country, lifting the requirements was seen as a big step toward returning to a prepandemic normal for the industry. Carnival,

Royal Caribbean

(RCL) and

Norwegian Cruise Line Holdings

(NCLH) gained earlier this week on the news.

They’re not gaining today. Royal Caribbean has dropped 7.3%, while Norwegian has fallen 7.7%.

Royal and Norwegian did not immediately reply to a request for comment.

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