Carnival bought 8 months more life time

Few notes on latest equity offering:

  • New shares from equity offering 62,5 m. and from convertibles offering 175m. if converted (virtually certainty if Carnival survives)
  • Existing shares 657 m.
  • So total diluted shares 895 m
  • New money coming in total, with credit facilities etc., is 9 BUSD
  • Current cash burn 1 BUSD month
  • So current liquidity with the new money about 8 BUSD, if about 1 BUSD has been burned
  • So with current cash flows there’s about 8 months life-time
  • Upside is 26 BUSD valuation, or last year end book value in one or two years (this is optimistic though as losses and debt mount and cash is burning)
  • So per diluted share basis that is 29,1 eur share upside case (3,4x)
  • Current feeling is that even 8 month is nothing close to normal (remember 80% normal is basically depression, at least on GDP level)
  • So new equity offering in coming month is big risk
  • In this scenario, with say 4 BUSD new equity @ 8 USD per share 500 m. new shares would be issue
  • After this there would be approximately say 1400 m. share
  • That’s 18,6 USD share book value per share, or 2x upside from here (with the same 26 BUSD book value valuation)
  • Upside is probably significantly less as the book value/BPS is melting
  • Ok so clearly this is very risky situation
  • How ever, calculations indicate there’s still some upside from current 8,5 USD per share levels, even if there’s further dilution (which is entirely plausible)
  • So current price already includes lot of bad, like over before Christmass
  • But risk scenario here is not some small loss, if market doesn’t start to normalize after christmass and credit and equity market close, it’s probably closer to zero or heavily diluted
  • So I don’t know if that 2-3x is enough upside, because even with the latest equity offering survival is not guaranteed and the 26 BUSD equity valuation in two years is optimistic as debt is constantly increasing and tourism doesn’t necessary recover fast from this
  • Jumped into this at 18 USD so sitting on nice loss
  • Acquisition was based on 3 min analysis “this is just a flue” normalizing after summer, but have since become less optimistic that will happen
  • Currently considering taking losses here as I have feeling there’s better “if it survives it’s yx from here” trades (1% position so didn’t make permanent damage for me)
  • Good lesson how fast things can change and industry leading blue chip falter
  • Portfolio YTD returns – 27%, which is some kind of miracle as I was 100% invested with big 8%ish positions in some leveraged virus bombs with no bid which are like -50%+ YTD…
  • Now 50% cash but trying to deploy to little safer stocks…

2 thoughts on “Carnival bought 8 months more life time

  1. What stocks did you sell out that you felt were most exposed? Agree on moving towards safety, but large cap “quality” isn’t really cheap so looking for more secure / undiscovered type of safe stocks..


  2. I sold all of Ibersol, most of CAFOM, 3/4 of Ferronordics, all of Unicredit, all of Vostok New Ventures, all off IREIFs, all of Ilkka, traded in and out of Metso and Cargotech. Added at least Tinkoff, Jedat, Cambria Automobile, Milicom, Boustead, PYN Elite Vietnam fund and Capri Holdings. Should do a portfolio update some time what I have been doing and with what results (not good) and what is the current situation…


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