By Dave Sebastian
Carnival Corp. shares rose 20% after Saudi Arabia's sovereign-wealth fund disclosed an 8.2% stake in the world's largest cruise operator on Monday.
The Public Investment Fund's purchase of 43.51 million shares came as the coronavirus pandemic has put the company's sailings to a halt. The fund has invested in Uber Technologies Inc., Tesla Inc., Penske Media Corp. and Lucid Motors Inc., according to FactSet. Based on Carnival's closing price on Friday of $8.49, the Saudi stake is valued at $369.4 million.
The stock rise is the company's largest percentage increase on record, according to Dow Jones Market Data. Shares in Carnival gained $1.72 to $10.21 on Tuesday. The stock has fallen about 80% so far this year.
Carnival and other cruise lines have sought to preserve liquidity as revenue dries up. Separately on Monday, Carnival said it has closed its offering of 71.88 million shares of common stock at $8 each. It also closed its offering of $1.95 billion in 5.75% senior convertible notes due in 2023. Carnival said it expects to close its $4 billion offering of 11.5% first-priority senior secured notes due in 2023 on Wednesday.
The Saudi fund's 8.2% stake reflects the company's number of shares outstanding on March 25 and doesn't include the latest capital raise, the fund said in a securities filing.
The Saudis' investment in Carnival represents a fraction of the fund's overall portfolio, and it could stand to gain when the cruise industry recovers, Instinet LLC analyst Harry Curtis said. The fund manages about $320 billion in assets, according to the Sovereign Wealth Fund Institute.
"The risk-reward is appealing because the next eight months, the industry has an opportunity to gradually recover from this crisis," Mr. Curtis said. "And their investment is being made at such a low level that they feel like the bad news is reflected in the stock."
Carnival Cruise Line said last week that it is further canceling some of its sailings through the end of the year, making it the first major cruise line to do so because of the global health crisis.
The company said last week that it expects most of its ships to be idled for a prolonged period. If 80% of its fleet were to be put in a prolonged layup, the company could reduce its monthly cash burn by about $100 million to $150 million, allowing it to survive as long as 15 months without revenue, UBS Securities LLC analyst Robin Farley said in a note to clients.
The cruise industry was among the first to take a public hit from the virus, along with airlines and hotels, as vacationers canceled plans, local governments halted tourism and passengers on board fell ill, leading to entire vessels full of passengers being quarantined.
Cruise companies were also e xcluded from the roughly $2 trillion coronavirus stimulus package, despite being one of the hard-hit industries President Trump has pledged to help. A spokeswoman for the Cruise Lines International Association, a trade group, said last month that the industry wasn't seeking a bailout in the first place.
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