On Tuesday, Norwegian Cruise Lines (NWCH) issued a statement that it had “serious doubt” it would avoid bankruptcy proceeding over the next year while issuing preliminary 1st quarter earnings of a -$2 billion loss. NWCH stated that “it does not have sufficient liquidity” to keep afloat over the next 12 months without a cash infusion.
Today, private equity firm L. Catterton transacted $400 million worth of exchangeable senior notes due in 2026 with rates of 7.0% – 7.5% over the next six years.
The market sold off the cruise line stocks on the news with NCLH down -21.64% in late day trading and Carnival (CCL) and Royal Caribbean (RCL) down -7.18% and -8.05% respectively. Shorts in the three cruise lines are up +$279 million in mark-to-market profits on the price moves.
Carnival continues to be the most shorted stock of the three cruise lines, and we have seen continued, albeit subdued, short selling over the last week in contrast to the slight short covering in Royal Caribbean and Norwegian.
Today’s indicative short selling\covering information is showing us a reversal of trading activity from last week. We are seeing slight short covering in Carnival today and slight short selling in Royal Caribbean. The most active stock on the short side is Norwegian, which is being hit with significant short selling today as short sellers are increasing their short exposure in anticipation of further price weakness in the stock. Norwegian short selling had tapered off since mid- April after seeing active short selling from late-February to mid-April. We should be seeing a new spike to total shares shorted over the next several days.
Looking at short selling trends over time provides insight into overall market sentiment as well as the strength of bearish conviction in individual equities. Our Blacklight SaaS platform and Black APP provides an up to date view of short selling and short covering on an equity, sector, index or country-wide basis allowing investors\traders to better manage their existing long and short positions as well as generate new trade ideas.
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Managing Director Predictive Analytics, S3 Partners, LLC
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