Shares of Carnival Corp. pulled back sharply on heavy volume Wednesday, after the cruise operator took advantage of a recent big rally to commence a private offering of debt that can be converted into common stock.
The company said late Tuesday that the offering of the $1 billion principal amount of convertible senior notes due 2027 was part of its 2024 refinancing plan. Carnival then announced overnight the pricing of the 5.75% notes.
took a 13.7% dive to $9.63, after closing Tuesday at a three-month high. Trading volume swelled to 124.5 million shares, compared with the average full-day volume over the past 30 days of 66.8 million shares.
The offering comes after the stock had soared 30.4% amid a four-day win streak through Tuesday, and after it had rocketed 74.9% off the 30-year closing low of $6.38 on Oct. 10.
The initial conversion rate per $1,000 principal amount of notes is equivalent to 74.6714 shares of common stock. That’s equivalent to a conversion price of $13.39 a share, a 20% premium to Tuesday’s closing price of $11.16.
The $1 billion offering represents about 9.3% of Carnival’s market capitalization of about $10.72 billion at Wednesday’s close.
Before Sept. 1, 2027, the notes will be convertible at the holder’s option, upon satisfaction of certain conditions, into common stock, cash or a combination of both. After that date, the notes will be convertible at any time.
The company can redeem the notes for cash if Carnival’s stock rises above $17.41 — about 81% above Tuesday’s close — on or after Dec. 5, 2025.
Carnival’s stock has dropped 8.8% over the past three months, while shares of rival cruise operators Royal Caribbean Group
have run up 43.7% and Norwegian Cruise Line Holdings Ltd.
have rallied 27.5%. The S&P 500 index
has declined 7.4% over the same time.