Norwegian Shares Fall Following Third Fundraiser In 20 Months

Low-cost airline Norwegian has held its third fundraiser in two years, selling some $272m worth of shares and bond issues. The airline says the money will see it through 2020 and beyond. However, investors are clear that the airline needs to prove it can become profitable. Shares fell 10% on the back of this latest funding round.

Norwegian has raised funds but lost share value in the process. Photo: Norwegian

Funds raised, shares fall

Struggling low-cost airline Norwegian has been handed a lifeline of 2.5bn crowns ($272m) from selling off shares in a discounted fundraiser. It sold off additional shares at a bargain price and issued a convertible bond. The airline says that the transactions now mean it is fully funded through 2020 and beyond.

The fundraiser consisted of the sale of 27.25 million new shares, almost 20% of its share capital, as well as a $150m convertible bond issue. Shares were issued at 40kr per share, and the bond issue came with the option to increase it to $175m.

Norwegian share sale
It’s the third share sale in 20 months. Photo: Norwegian

The company released a statement on the sale, carried by City AM, which read,

“The private placement received significant interest from both existing shareholders in the company and new high-quality investors. The convertible bond issue received significant interest from international and domestic investors.”

Acting CEO Geir Karlsen commented in a press release,

“The capital raised will secure required financing of working capital during the winter season and create financial headroom as the company moves from growth to profitability. The actions we are now taking will enable us to embark on the next chapter of Norwegian, to the benefit of all shareholders, customers and employees.”

The market did not react well to the sale, with shares in Norwegian dropping more than 10% this morning. At midday today, the stock was trading at 41.4kr, down 10.2% from the day before.

Aiming to remain profitable

This is the airline’s third share sale in two years, as it struggles to overcome previous losses. In 2018, the company lost some £131m, blaming this on rising fuel costs as well as issues with its aircraft. As well as being hit by the Boeing 737 MAX grounding, Norwegian has been a victim of the ongoing problems with the Rolls Royce Trent 1000 onboard its 787 Dreamliners.

Norwegian Boeing 787
Norwegian has struggled with grounded Dreamliners. Photo: Norwegian

As such, the airline has been undertaking a number of cost-cutting measures, including selling aircraft, abandoning routes and entering into a joint venture with a subsidiary of China Construction Bank to add 27 Airbus aircraft to its fleet. The airline has also said it will be shrinking capacity by around 10% next year.

Norwegian’s efforts to return to profitability have not gone without impact. The airline’s third quarter was its best-ever Q3 result, with profits up 38% year on year to almost £187m. While the cash injection will see the company through the coming months, it’s important that it strives for profitability in the long term.

Jan Petter Sissener, founding partner of Norwegian fund Sissener AS which invested in Tuesday’s sale, told Reuters,

“They have to show they’re able to earn money. I don’t think the market will be as forgiving another time. They must show they can cut costs and generate a positive cash flow in 2020.”

With a new interline agreement with JetBlue on the horizon and promises of 2020 transatlantic capacity boosts, will Norwegian remain profitable through next year?