Selling Norwegian Cruise Line Shares Makes Sense

The cruise line with the weakest cash position is arming itself with the necessary cash. Freshly released a rough quarterly report – but supported by a buoyant stock price after a double blow of encouraging news on vaccines – Norwegian Cruise Line Holdings (NASDAQ: NCLH) files a sale of shares.

The third largest cruise operator in the country offers 40 million shares. Revenue is earmarked for “general business purposes” but ultimately it is about saving time. This move will raise more than $ 800 million at current prices, which will greatly help Norwegian Cruise Line.

Navigate to the future

It is not known whether cruises will resume in early 2021 or at some point later in the year. Norwegian Cruise Line can’t afford to guess. He also cannot afford to reject the current good fortune in the market. Norwegian Cruise Line shares have climbed 30% in the past seven trading days, reaching their highest level on Tuesday since early June.

The cruise industry has had a tough year, but Norwegian Cruise Line, Carnival (NYSE: CCL) (NYSE: CUK) and Royal Caribbean (NYSE: RCL) have skyrocketed since early last week following the announcement of one and now two potentially viable pandemic vaccines.

If you’re Norwegian Cruise Line, you’re not going to look at a five month gift high in your mouth. Norwegian had $ 2 billion in net cash at the end of September. Its cash consumption rate fell to $ 150 million per month in the third quarter, but that will climb to $ 175 million per month in the current quarter – and even more if it has to prepare its boats to start sailing. early next year. Norwegian Cruise Line also has around $ 800 million in debt that falls due in the coming year, and refinancing will be more difficult if it runs out of funds as the cruise industry does not or does so. heavy losses.

Carnival and Royal Caribbean raised significantly more money during the disruption than Norwegian Cruise Line. They naturally burn more greenbacks as big companies, but you don’t want to be the distant bronze medalist when it comes to liquidity if this industry disruption persists or consumers are slow to embrace a return to the high seas. Norwegian Cruise Line is still trading significantly less than it was at the start of the year, but it remains one of the riskiest consumer discretionary stocks until we have visibility on the path to profitability.

The three players are on the clock. Any new share offering will be seen by the market as dilutive – explaining why Norwegian Cruise Line shares fell late in trading on Tuesday upon news of the filing – but that’s undeniably what the cruise operator needs in this moment. Money is time. Money is the power to make tough decisions instead of having them made for you. Money is more important in the long run than short term declines.