Casinos & Hotels

How Saudi Arabia Is Sailing Away With Carnival

Chris Lange

Carnival Corp. (NYSE: CCL) shares saw another incredible gain on Tuesday after it was disclosed that the Saudi Arabia sovereign wealth fund, The Public Investment Fund, had acquired roughly an 8% stake in the cruise line operator.

According to the filing with the U.S. Securities and Exchange Commission (SEC), The Public Investment Fund has acquired 43.5 million shares, or an 8.2% stake in Carnival, as of March 26. This would make the fund Carnival’s third-largest shareholder.

The Public Investment Fund has invested abroad previously, including stakes in Uber, Tesla and SoftBank’s Vision Fund.

The cruise industry has been one of the most battered in the stock market lately. The coronavirus pandemic effectively has cratered cruise brands. While the S&P 500 and Dow Jones industrial average have pulled back over 20% year to date, cruise stocks have dropped at least 75%. If anything, the Saudis are getting this stock at an incredibly cheap price, although many would consider this industry distressed and the future uncertain.

Last week, Carnival announced a secondary offering and a debt offering.

At that time, the company announced that it priced its 62.5 million shares of common stock at $8 apiece, with an overallotment option for an additional 9.375 million shares. The aggregate amount of shares of common stock to be issued in the offering was decreased to approximately $500 million from the previously announced $1.25 billion.

Separately, Carnival said that it has priced its previously announced private offerings to eligible purchasers of $4 billion aggregate principal amount of 11.500% first-priority senior secured notes due 2023 and $1.75 billion aggregate principal amount of 5.75% senior convertible notes due 2023.

The aggregate principal amount of the senior secured notes to be issued was increased to $4 billion from the previously announced $3 billion.

Carnival stock traded up about 18% at $12.07 on Tuesday, in a 52-week range of $7.80 to $56.04. The consensus price target is $32.41.