Carnival director offloads more than $17m-worth of shares

Cruise operator Carnival (CCL) has been hammered over the past year as the pandemic has left its ships sitting idle. The group swung to an $8.9bn (£6.4bn) operating loss in 2020, and also reported a $1.5bn operating loss in the three months to 28 February 2021.

Sitting still has proved to be an expensive business – Carnival’s average monthly cash burn came in at $500m in the first quarter of this year, and it is guiding that this will increase to $600m for the May quarter. 

In order to keep its head above water, the group has been forced to raise $23.6bn through debt and dilutive equity offerings since the beginning of this crisis. With $11.5bn of cash and short-term investments to hand, it says it now has enough liquidity for at least the next year.  

Against that backdrop, non-executive director Randall Weisenburger recently sold more than $17.5m-worth of shares on the New York Stock Exchange (NYSE) – where Carnival has a dual listing – reducing his holding by 46 per cent. He offloaded the shares in three main tranches at prices above $27, which is slightly above Carnival’s current US share price of $26.

No reason was given for this sizeable disposal, and it marks a complete turnaround from just over a year ago, when Weisenburger took advantage of Carnival’s ‘Corona crunch’ low and purchased $10m-worth of shares at a rock-bottom price of $8 each.

It is also at odds with prevailing market sentiment. As the vaccine rollout continues, investors – including the Reddit brigade – are getting more optimistic that Carnival will soon be able to set sail. Its shares have risen by a fifth so far this year in London, and by more than a quarter in New York, although they remain below pre-pandemic levels. 

Six out of Carnival’s nine brands are expected to resume their cruise operations on a limited basis by the summer, and with cumulative advanced bookings for next year being ahead of pre-crisis levels, this suggests that there is pent-up demand.

But the all-important North American market remains stagnant as restrictions imposed by the US Centers for Disease Control and Prevention (CDC) mean that sailing from US ports is effectively a no-go until November.

Still, demand for cruises will eventually rebound – although likely at a slower rate than air travel – and Carnival is the world’s largest cruise line operator. While it is sitting on a dizzying $21bn of net debt, it is perhaps worth holding onto the shares at 1,531p to ride out the pandemic recovery momentum. Move to hold.  

Last IC View: Sell, 740p, 02 Apr 2020