Carnival’s Stocks Soar as Saudi Fund Group Buys Stakes

A Saudi fund group has bought a significant number of shares -over 8 percent of the total- in the cash-strapped cruise company, according to a news report posted by CNBC.

Shares of Carnival Corp. rose more than 20% on Tuesday, extending Monday’s gains after the Saudi sovereign wealth fund disclosed in a securities filing an 8.2% stake in the cruise operator. Carnival stock is still down more than 70% since Jan. 1.

According to CNBC, the disclosure of the public investment fund’s 43.5 million-share stake in Carnival comes as the company scrambles for liquidity as the coronavirus pandemic cripples the global travel industry.

The public investment fund’s purchase of 43.5 million shares in Carnival comes as the company scrambles for liquidity while the coronavirus pandemic cripples the global travel industry, particularly the major cruise lines. 

Passengers have fallen ill and died as cruise ships become sites of COVID-19 epidemics, prompting the suspension of operations for Carnival and peers Royal Caribbean Cruises and Norwegian Cruise Line.

In its quarterly earnings report published last week, Carnival did not provide 2020 guidance but assured investors that it will be able to remain in compliance with its debt obligations for at least 12 months. It added that the pandemic presents an unprecedented challenge to the industry.

On March 13, the company fully drew down its $3 billion revolving credit facility. Last week, the company announced it was raising about $6 billion by issuing a mix of debt and equity.

As the cruise industry hemorrhages cash, it appears to have been excluded from the $2 trillion coronavirus stimulus package. 

Of the big three cruise companies, Carnival is best suited to weather a sustained downturn without any revenue, according to UBS Securities analyst Robin Farley. The company could survive for as long as 15 months without making any money, she wrote in a note Monday.