"CNN Effect" Doesn't Stop Royal Caribbean CEO From Buying Nearly $1,000,000 in RCL Cruise Stock

Yesterday, I wrote a short article about Royal Caribbean President Adam Goldstein selling 2,181 shares of RCL cruise stock earlier this week at an average price of $36.80, for a total value of $80,260.80. Cruise executives buying and selling their company's own stock is interesting to me as an indicator into their true thoughts about the direction of their business' future.

That being said, an cruise executive's sale of only $80,000 worth of stock doesn't say much. $80,000 may pay the annual wages of a dozen RCL utility cleaners but it's pocket change for a cruise line president. Goldstein still owns 335,654 shares of the company’s stock worth over $12,350,000.   

But today Forbes reports that Royal Caribbean CEO Richard Fain purchased 26,800 shares of RCL stock which, at a price of $36.82 a share, turns out to be $985,776.

As Forbes writes: "company’s own top management tend to have the best inside view into the business, so when company officers make major buys, investors are wise to take notice."

RCL’s low point in its 52 week range is $24.16 per share. Its 52 week high is $38.62. 

So CEO Fain is buying near the top of the chart. Seems risky to me.

As we mentioned this week, research firms are split on RCL's stock. One analyst gave the stock a "sell" rating, nine analysts assigned a "hold" rating and ten issued a "buy" rating. RCL currently has a consensus rating of “hold” and a consensus target price of $40.21.

Royal Caribbean Cruise Richard Fain Travel Weekly quoted Fain at the cruise line's second-quarter earning call last week. He said that despite the “unrelenting pressure of a deluge of negative publicity” on the cruise industry, things are looking up. Mr. Fain said the company is overcoming what he called the "CNN effect” of negative media scrutiny on things like highly publicized cruise ship fires that have occurred this year.

Royal Caribbean suffered a serious fire to its Grandeur of the Seas. And just last month, it's subsidiary brand Pullmantur's Zenith suffered an engine room fire which disabled the ship which needed to be pulled by tugs to back to shore.  

Royal Caribbean is also suffering from the spill-over effect from the negative publicity caused by Carnival's Costa Concordia disaster and the Triumph's infamous "poop cruise," in addition to other Carnival cruise ship mishaps.   

Does Mr. Fain know something that the analysts and the public doesn't know? Or this really a big calculated bluff to prime the pump of positive thinking?

I am not too sure that I would bank on a more positive public perception of the cruise industry developing naturally. The "CNN effect" is real.  In my opinion, the images broadcast by CNN are a lot more persuasive and powerful than the positive musings of a hopeful cruise executive.  

Plus there's a couple of things to keep in mind. There are increasing cut backs in RCL officer and staff salaries and crew pay coupled with an increase in their responsibilities which are deteriorating morale on the ships. Some of the tips which formerly went to the RCL cabin attendants and waiters are being channeled away from the crew to the company's income stream and destroying the crew's attitude in the process. And the MLC will come onto effect next month, restricting crew member working excessive hours, which may increase RCL's costs, restrict the cruise line's historical exploitation of its crew, and push its profit margins down.

Royal Caribbean Grandeur of the SeasRCL's cost cutting measures helped it to squeeze out a profit this past quarter, but it was under $25 million on gross revenues of $1.88 billion. How much more can RCL cut from the already overworked and underpaid crew?

And no cruise executive pumping up a stock price would dare mention Senator Rockefeller's announcement last week that he intends to introduce legislation to take away the loopholes in the U.S. tax code which permits the cruise lines to avoid U.S. taxes on its foreign flagged cruise ships.

Are brighter days ahead for RCL and CEO Fain's newly acquired 26,800 shares?

Maybe. Maybe not. But one thing is certain. All it will take is for one cruise ship to suffer another engine room fire for the "CNN effect" to send the RCL stock price plummeting south.

July 31 2013 Update: Watch List News reports that Royal Caribbean Cruises' President  Adam Goldstein "dumped 16,717 shares of the stock on the open market in a transaction that occurred on Tuesday, July 30th. The stock was sold at an average price of $37.20, for a total value of $621,872.40."

 

Photo Credit:

Top: Royal Caribbean Press Center

Bottom: Janeeva Russell / The Freeport Times / AP

Royal Caribbean Reports $392,800,000 Loss for Last Quarter

The Associated Press reports that cruise giant Royal Caribbean lost $392.8 million in the fourth quarter because of losses associated with its Spanish cruise line, Pullmantur.

The AP states that Royal Caribbean wrote down $413,900,000 due to a substantial drop in bookings and prices in Spain following the Spanish government’s austerity measures. Royal Caribbean also blamed its losses on the Costa Concordia disaster a year ago.

Royal Caribbean had a profit of $36.6 million during the same quarter a year ago. 

In December we reported that Royal Caribbean's top executive Richard Fain bailed on out on a large block of cruise line stock.

In December 2012, Chairman and Chief Executive Officer Richard Fain sold 143,140 shares of RCL stock for $4,964,095.  

Fain followed up by exercising options and selling 188,443 shares for $6,535,203, for a total of around $11,500,000.  

$11,500,000 in cash in your pocket and 6 weeks later your cruise line posts a loss of over $392,000,000. Goes to show you that cruise line executives have fun making millions hand over fist regardless of how the company performs.

Video below is of CEO Fain on one of the Royal Caribbean FlowRiders (via RCCL YouTube).

 

Cruise CEO Fain Bails On Royal Caribbean Stock For Over $11,500,000

Barron's reports that Royal Caribbean Cruises' top executive recently bailed out on a large block of cruise line stock just before the cruise line's shares touched a new 52-week intra-day high.

On December 13th Chairman and Chief Executive Officer Richard Fain sold 143,140 shares of RCL stock for $4,964,095, an average of $34.68 each. Barron's says that Fain followed up by exercising options and selling 188,443 shares for $6,535,203. 

The RCL stock is down over a point since CEO Fain bailed on the stock. Fain still holds 1,049,064 shares directly and 421,412 shares indirectly.

The last time we wrote about RCL's CEO was when he and other executives at the cruise line were sued for fraud for allegedly making false and misleading statements about the company's fourth quarter results for 2010. In January 2011, the day after touting the financial strength of the cruise line, CEO Fain sold 200,000 shares at a price of $46.63 for what the lawsuit alleges were total illicit proceeds of $9,326,000.  

Big bucks and cruise CEO's go hand in hand, irrespective of how the cruise industry is actually faring. A couple of weeks ago we wrote about Carniva's Micky Arison paying himself a bonus of $90,000,000 after what he describes as one of the one most challenging years for the cruise lines yet. 

Royal Caribbean Cruises CEO Richard Fain

January 4 2013 Update: The issue of cruise line executive compensation made our list of top ten stories for last year:

2012 was reportedly a difficult financial year for the cruise lines but you would never know it by looking at the huge sums of money, bonuses and stock options which the cruise line CEO's pay themselves. In contrast Fain' with his regular multi-million-dollar salary and the $11,500,000 from stock sales, Royal Caribbean's bar-servers were paid only $50 a month and required to work for tips carrying a dozen tropical drinks around the pool deck while balancing a bottle of rum on their heads

 

Photo Credit: Wall Street Journal Smart Money / by Jeffrey Salter / Redux