What happens if the stock drops to $0.00

[ew101]

11 hours ago, chengkp75 said:

Revenues have been dropping the last few months, so the cash flow out will increase.  

I finally read the 3Q22 summary.  CARNIVAL CORPORATION & PLC PROVIDES THIRD QUARTER 2022 BUSINESS UPDATE | Carnival Corporation & plc   

 

• U.S. GAAP net loss of $770 million and adjusted net loss of $688 million for the third quarter of 2022.
• Adjusted EBITDA for the third quarter of 2022 was over $300 million, turning positive for the first time since the resumption of guest cruise operations and marking a significant milestone.
• Revenue increased by nearly 80% in the third quarter of 2022 compared to second quarter 2022, reflecting continued sequential improvement.
• Occupancy in the third quarter of 2022 increased 15 percentage points from the prior quarter.
• Since the announcement of the company's relaxed protocols in mid-August, aligning the company towards land-based vacation alternatives, booking volumes for all future sailings are considerably higher than strong 2019 levels.
• Third quarter 2022 ended with $7.4 billion of liquidity, including cash and borrowings available under the company's revolving credit facility.

 

So they still had open cabins to fill.  One other number we can all see- revenue per Passenger Cruise Day is down vs. 2019.  This is likely part of the discount to fill pricing on the shorter voyages.  The $300M in EBITDA says they are almost able to pay the interest bill of $400M with cash flow.  There is still some capacity offline and some markets/lines are performing poorly.  My guesses are Costa and Cunard.   

 

The big question- if they get all the ships up and running and full, will the whole operation turn cash flow positive?   It would seem it may- in 2023.  Barring some natural or manmade disaster.    

 

If the stock price falls far enough some raider could buy it.    

[ew101]

31 minutes ago, ray98 said:

Well....considering they are denying them left and right for casino or 'discounted' rates it seems finances are playing a role.

Filling the ships is important.  But if the fare is around or below breakeven, then not.  And if in the US, if you give a $100 credit on top of free casino cruise, or $25 fare, you could likely sell the same cabin for $499.  (Check the fares on US departures a week before they sail- not a not cheap cabins are left these days).  The idea of the credit is to get people to decide to cruise (at average prices) vs drive to Disney and stay on CCL vs Royal or the like.  

Edited October 11, 2022 by ew101

[crewsweeper]

14 hours ago, chengkp75 said:

No, it's not.  It still has assets (ships and buildings).  Those don't disappear when the stock goes to zero.  The shareholders lose everything, but a zero share price does not really affect the daily operation of the company.  The company does not have to redeem shares, and never gain money or lose money when share prices go up or down.  The only time the company gets money from stock shares is when the share is first issued.  Share price is never part of the company's annual balance sheet.  Shareholders have no claim to company assets unless the board decides to declare bankruptcy (it is not a mandatory action when the share price reaches zero, but the shareholders can vote for bankruptcy), at which time creditors get first crack at the assets, and then the shareholders.

On the selected quote you picked, notice I said NO ASSETS. Nothing to Value.  The stock would NOT go to zero if there are things of value.   See further the example of GT Advanced Tech where with assets and operations it managed to stay above zero in share price.    

But you are correct in that if the bankruptcy is declared the creditors get first crack and if then nothing is left, common share holders will not get anything.

[asalligo]

Carnival is in a really tough spot and I would no longer bet on the company staying afloat. Last two quarters they sailed at average capacity of 67% and 78% despite everyone on this board thinking they have been sailing at full capacity and most of those fares were discounted deeply. They cannot raise prices much because the intelligent cruiser will jump to another line. They cannot compete with lines like Royal at the same price and MSC is working really hard at stealing their market. They need to gamble at this point and saturate the market with ad campaigns and drop all testing. For some reason an idiot at Carnival spent big money on ad campaigns last year when 40% of their market base could not even step on a cruise.

[ew101]

42 minutes ago, asalligo said:

Carnival is in a really tough spot and I would no longer bet on the company staying afloat. Last two quarters they sailed at average capacity of 67% and 78% despite everyone on this board thinking they have been sailing at full capacity and most of those fares were discounted deeply. They cannot raise prices much because the intelligent cruiser will jump to another line. They cannot compete with lines like Royal at the same price and MSC is working really hard at stealing their market. They need to gamble at this point and saturate the market with ad campaigns and drop all testing. For some reason an idiot at Carnival spent big money on ad campaigns last year when 40% of their market base could not even step on a cruise.

According to this, US Coronavirus vaccine tracker | USAFacts 68% of the US population is fully vaccinated, not that it matters on a cruise any more now 🙂

The new 10-Q says Carnival was at 84% occupancy in the quarter ending 8/21/22.  This may not consider ships still offline in shipyards, etc.  Form 10-Q for Carnival Corp filed 09/29/2022

Carnival faces formidable competition - one thing they can fully control is customer service which seems to be a strength.  The key right now is occupancy - the fleet is there - the berths need to be filled.  

 

[Drazil65]

Just hold on to it and hope it goes backup? Or what?

 

Yes, the long game and that is what you get with the stock market...its a gamble...

[chengkp75]

1 hour ago, crewsweeper said:

The stock would NOT go to zero if there are things of value.

Why?  The stock price is based on what someone is willing to pay another shareholder for that stock.  If there are assets, but no confidence that a shareholder would get anything out of a liquidation, then there might be no buyers at any price.  Share price drops to zero.  Share price is not determined by company assets, but by investor confidence that they will get a return on their investment.

 

And, you said that the company would be bankrupt if the share price went to zero, which it wouldn't necessarily.  I agree that if the company went bankrupt, there would be no assets left, after liquidation, but you know what?  Even if the share price is zero, and the company goes into liquidation, and there is any shareholder equity left over after paying the creditors, the shareholders would get some of the assets.  Assets and share price are not conjoined.

Edited October 11, 2022 by chengkp75

[mz-s]

1 hour ago, crewsweeper said:

On the selected quote you picked, notice I said NO ASSETS. Nothing to Value.  The stock would NOT go to zero if there are things of value.   See further the example of GT Advanced Tech where with assets and operations it managed to stay above zero in share price.    

But you are correct in that if the bankruptcy is declared the creditors get first crack and if then nothing is left, common share holders will not get anything.

 

Stock absolutely can go to $0 even if a company has assets. Obviously it usually doesn't - somebody will come in and buy the company before it gets to $0, even if just to pillage the assets. But that doesn't mean it's impossible for it to happen.

[ray98]

1 hour ago, crewsweeper said:

The stock would NOT go to zero if there are things of value.   

Incorrect.

[buckeyefrank]

17 hours ago, LocoLoco1 said:

Always appreciate your intelligent remarks. QUESTION: So.. if CCL can pay it’s bills, then the ‘FatCat’ investors/funds that $own$ most of CCL’s stock will glumly let the market determine it’s dismal value nearly forever and tell the Board to sail on??. If so, then where’s any Corporate advantage to filing a bankruptcy petition??  What would push CCL over that edge??

Carnival's stock price and operating results are two completely separate things.  They are only related in that good operating revenues signal company strength and incite investor purchases, which thereby raise the stock price. 

 

The "FatCat's" you mention (after CCL executives) are mostly individual cruisers using stock benefits and mutual funds that are relied upon by the masses.

 

Carnival's decision to declare bankruptcy is completely separate from their stock price.  They would generally only declare bankruptcy when they become insolvent and can no longer afford to pay their operating expenses.  The advantage to filing bankruptcy is that they can reorganize their debt and hopefully become profitable for long-term operations.

[ALWAYS CRUZIN]

15 hours ago, chengkp75 said:

And that has dropped from $8.9 billion in 9 months, or about $200k/month.  That's about 3 years of cash, provided fuel costs (and they don't control these with futures contracts) don't drive them to spend much faster.  Revenues have been dropping the last few months, so the cash flow out will increase.  Those 90 ships are valued at $38 billion, with a long term debt against them of $28 billion.  That $7 billion in cash is balanced against current liabilities of $12.9 billion.  So, of that $8.4 billion in shareholder equity that ledges1 posted, all of that is from the equity in the ships.  Don't kid yourself that Carnival is in a good place.

And that's Billion with a "B"

[cruisingguy007]

3 hours ago, asalligo said:

Carnival is in a really tough spot and I would no longer bet on the company staying afloat. Last two quarters they sailed at average capacity of 67% and 78% despite everyone on this board thinking they have been sailing at full capacity and most of those fares were discounted deeply. They cannot raise prices much because the intelligent cruiser will jump to another line. They cannot compete with lines like Royal at the same price and MSC is working really hard at stealing their market. They need to gamble at this point and saturate the market with ad campaigns and drop all testing. For some reason an idiot at Carnival spent big money on ad campaigns last year when 40% of their market base could not even step on a cruise.

 

That's probably across all brands, their Carnival brand seems to be doing well in the capacity department, other brands, not so much. I'm sure they would love nothing more than to sell some of their under-performing brands and focus on the domestic core brand but who will buy it and for what price? Having the assets on the books makes things appear better and helps with padding/projections but at some point, may become too big of a anchor on the core brand. A breakup and decoupling of dead weight may be in order but will be a tricky endeavor to get a decent price or optimal outcome, if they can wait that long, their hand may be inevitably be forced.

 

I think you made a fine point about raising prices too high and too quickly, especially in the face of cutbacks/reductions. Anyone who's sailed on their classic product will notice, blue card folks may not. Customers will flock to the competition at certain price points, even if it costs a bit more but the value is greater. I'm already seeing more included with some competitor brands and not everyone will be fooled by the low fare price and will compare all the up-charges or "all-in/overall" rate. This could certainly be a problem moving forward, especially with the economic pressure that many passengers are facing. Perfect storm so to speak.    

Edited October 11, 2022 by cruisingguy007

[asalligo]

3 hours ago, ew101 said:

According to this, US Coronavirus vaccine tracker | USAFacts 68% of the US population is fully vaccinated, not that it matters on a cruise any more now 🙂

Carnival cruisers demographics were much lower than that percentage. Look at vaccination rates by income and then the projected number of Carnival cruisers making under 60k per person. 

[spleenstomper]

I would make sure I buy trip insurance if I am taking a cruise in the n3ext 2 years that covers getting back home if the cruise line goes bankrupt. Etc.

[CeleBrat]

19 hours ago, chengkp75 said:

Anyone who bought cruise line shares for any other reason than buying the minimum for shareholder benefits has always been taking a large risk.  Shipping companies, of any type, are one disaster away from folding.  The ROI on cruise industry stocks is decidedly middle of the road, there are many better investments out there than shipping stocks.

Just out of curiosity, what is the minimum to get shareholder benefits?

[chengkp75]

100 shares.

[pc_load_letter]

5 hours ago, asalligo said:

They need to gamble at this point and saturate the market with ad campaigns and drop all testing. 

 

I saw a Carnival ad on tv last night. First time I have ever seen a Carnival tv spot.

[pc_load_letter]

1 hour ago, cruisingguy007 said:

 

Customers will flock to the competition at certain price points, even if it costs a bit more but the value is greater. I'm already seeing more included with some competitor brands and not everyone will be fooled by the low fare price and will compare all the up-charges or "all-in/overall" rate. This could certainly be a problem moving forward, especially with the economic pressure that many passengers are facing. Perfect storm so to speak.    

 

After more than dozen or so Carnival cruises in the last few years (pandemic exluded), we wanted to try NCL out of SoCal. We've been on NCL for several cruises and never had a bad cruise on NCL but they were always 7 day or longer itineraries. 

 

When looking at prices of Carnival out of LBC for 4 days versus NCL for 5 days, Carnival was cheaper but when I added in the drink package for four days, Carnival was more expensive than the 5 day NCL cruise we booked with the "free at sea" offers.

 

Seemed like a no brainer. Never cruised out of San Pedro and never been on Bliss before so we hope to have a good time.

[asalligo]

1 hour ago, CeleBrat said:

Just out of curiosity, what is the minimum to get shareholder benefits?

100 shares