Saudi Arabia took an important part in the carnival. What does it mean?
The largest cruise line in the world, Carnival (NYSE: CCL) accounts for about half of all cruises worldwide. For now, the company’s fleet of more than 100 vessels remain at the berth, with no clear timeline for the start of crossings (although the company has said it will restart some operations in the United States in mid-May).
Of course, any date is little more than wishful thinking right now. It’s also almost impossible to predict when customers will feel comfortable cruise, when the company can resume its full schedule, and when some ports will reopen to cruise ships.
As you can imagine, this created a cash shortage for Carnival, causing its shares to drop by about 80%. It costs around $ 1 billion per month to operate the cruise line, which led the company to sell 71,875,000 common shares at $ 8 per share (well below its 52-week high of 56.04 $), a move that may have opened the door for some large investors, including the Saudi Arabia Public Investment Fund, which now owns an 8.2% stake in the cruise line.
What is the Public Investment Fund?
Basically, the Public Investment Fund (PIF) makes investments on behalf of the Kingdom of Saudi Arabia. The country uses its resources to diversify and take stakes in various companies, which it explains on the PIF website.
The Public Investment Fund seeks to become a leading global impact investor in line with the goal of Vision 2030 and drive Saudi Arabia’s economic transformation, through active long-term investments and sustaining high standards of governance and transparency. The Public Investment Fund develops a portfolio of high quality national and international investments, diversified by sectors, geographic areas and asset classes. Working alongside global strategic partners and renowned investment managers, PIF acts as the Kingdom’s leading investment arm to execute a strategy focused on achieving attractive financial returns and long-term value. for the Kingdom of Saudi Arabia.
It’s a long way to say that Saudi Arabia has money (or at least its royal family has) and that it spends that money on a wide range of businesses both public and private. PIF invests both in Switzerland and abroad and has already acquired stakes in Uber and You’re here.
Is it good for carnival?
Carnival has raised a significant amount of cash, including $ 4 billion in financing at a staggering 11.5% interest rate. The fact that an entity with deep pockets takes a major stake in the cruise line could be positive.
PIF now has a vested interest in the cruise line not going bankrupt. In the event of bankruptcy, shareholders generally fare badly. There is basically an order in how people are paid, and creditors tend to be on the front lines.
Carnival may not need the more money, but PIF could loan them the money or buy more shares directly from the company if the money tightens. What he would want in return for company funding (board seats, oversight over management, etc.) may be more than what the company wants to pay, but Carnival may not have the choice at some point.
For Carnival shareholders, it’s hard not to see this investment as positive. When you’re strapped for cash (or could be), having a friend with deep pockets who has a vested interest in your survival is probably a good thing.
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