The stock market was blended on Monday early morning, as financiers continued to see some disparities amongst stocks in different sectors. The general issue about the financial impact of the novel coronavirus pandemic has taken a huge toll on shares of “old economy” stocks, specifically in locations like financials and products stocks. Simply prior to 11 a.m. EDT, the Dow Jones Industrial Average ( DJINDICES: ^ DJI) was down 209 points to 24,122, and the S&P 500( SNPINDEX: ^ GSPC) dropped 16 points to 2,914
Cruise liner operators have actually been among the stocks hit hardest by the COVID-19 break out, and the suspension of operations has put business like Carnival ( NYSE: CCL) and Royal Caribbean Cruises ( NYSE: RCL) under significant financial pressure. This morning, Norwegian Cruise Line Holdings ( NYSE: NCLH) revealed the current information about what it required to get more financial investment capital at a particularly difficult time. Even though Norwegian’s ability to get a deal done at all speaks to the demand among financiers to help the business, there’s still considerable unpredictability about what the future might appear like for it and its competitors on the high seas.
Image source: Norwegian Cruise Line Holdings.
Norwegian raises capital– at a price
Shares of Norwegian Cruise Line Holdings dropped more than 6%Monday early morning. The company announced its success in getting investors to pony up more money to add to its financial resources, but the cost of enticing them to do so was steep.
Norwegian used two various approaches to raise money. The very first was a basic secondary stock offering, in which Norwegian sold 41.8 million shares of stock. The business managed to price the offering at $11 per share, which was more than 11%listed below Friday’s closing price of $1243 Norwegian will wind up with about $460 million in earnings from the offering, minus underwriting costs, with the underwriters completely exercising their choices to acquire additional shares in the procedure.
Yet as difficult as it is to accept an 11%discount rate on freshly released shares, the prices of Norwegian’s other securities offering supplied much more insight. The company sold $8625 million in exchangeable four-year notes. Financiers will receive interest payments at 6%every year, with the alternative to trade the notes for special favored shares of Norwegian stock. With each $1,000 in debt giving shareholders the right to get just under 73 preferred shares, working out to a conversion price of about $1375 per share– 25%more than the $11 share offering, however only 11%higher than Friday’s closing price.
Outliving the coronavirus
The offering results didn’t buoy belief about other players in the cruise line space. Shares of Royal Caribbean were down about 5%Monday morning, and Carnival weighed in with a drop of more than 3%.
Companies are working hard to attempt to preserve the money they have on hand, but it’s getting increasingly hard as their stoppages continue.
Yet it’s not guaranteed that all cruise line companies will survive or fail together. Brand strength will inevitably contribute, and some cruise stocks may jump even as others fall
Economists fear that a recession could have a significant impact on the whole international economy, with travel taking an especially big hit. If that takes place, then it’ll challenge Carnival, Royal Caribbean, and Norwegian, and it’ll be interesting to see whether the different moves that each business makes will assist or hurt their possibilities of survival in the long run.
Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool recommends Carnival. The Motley Fool has a disclosure policy.
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Dan Caplinger has no position in any of the stocks mentioned.
The Motley Fool advises Carnival.
The Motley Fool has a disclosure policy