Share prices of British-American cruise operator Carnival Corp surged by more than 10 percent on Tuesday. The gain extended the share's 20 percent increase on Monday following news of a substantial 8.2 percent stake acquisition made by the Saudi sovereign wealth fund.
The company's share prices reached a peak increase of 20 percent on Tuesday before closing up with a more than 10 percent gain. The two-day gain managed to offset some of the losses incurred by the company since it halted the operations of its cruise liners following the spread of the coronavirus pandemic. Despite the gains, the stock is still down by more than 70 percent since January.
Saudi Arabia's public investment fund reportedly purchased a total of 43.5 million shares of Carnival Corp. The investment was seen as a timely rescue for the cruise operator given its dire need for additional liquidity.
The company has been heavily crippled by the global travel industry slump, particularly after several passengers had fallen ill and died on a number of its cruise ships. Since the incidents, the company had been forced to suspend operations of its fleet under its subsidiaries Carnival and peers Royal Caribbean Cruises and Norwegian Cruise Line.
In its quarterly earnings report, Carnival Corp chose not to release its 2020 guidance for investors. However, the company did reassure stakeholders that it should still be able to meet with its debt obligations in the next 12 months. The operator acknowledged that the pandemic poses an unprecedented challenge for the company and the industry as a whole.
Carnival Corp stated that it cannot properly estimate the liquidity requirements to ensure its survival given that it has never had to completely halt its cruising operations. However, it stated that it is committed to doing everything it can to make endure the sustained downturn.
So far, the company has managed to bolster its finances through various strategic moves. Earlier last month, the company secured around $3 billion from its revolving credit facilities. Last week, it revealed plans to raise up to $6 billion through the issuance of debt and equity. The company is expected to also to secure additional liquidity from the US $2 trillion coronavirus stimulus package.
While its ships remain docked, the company is heavily hemorrhaging cash. According to USB Securities, Carnival Corp does have the resources to survive the crisis based on its financial standing. Analysts estimate that the company could survive for as long as 15 months without any revenue given its current liquidity.