- The Kingdom of Saudi Arabia has made a (perhaps unwise) decision to invest in Carnival Cruise.
- This is the latest in a long string of questionable financial decisions from the authoritarian desert kingdom.
- The Saudi investment is bad for Carnival’s image. The company is already dealing with the fallout from massive coronavirus outbreaks on its ships.
Not known for making intelligent financial decisions, the Kingdom of Saudi Arabia has decided to throw its weight behind Carnival Corporation (NYSE: CCL). The repressive Middle-Eastern kingdom will purchase a staggering 43.5 million shares of the embattled cruise company giving it an 8.2% stake in Carnival.
As if Carnival’s reputation wasn’t bad enough, this association with a fundamentalist regime won’t do much good for its already tarnished brand image. Carnival is reeling from a series of fatal coronavirus disasters on its cruise ships, tax avoidance and a failure to obtain bailout funds from the U.S. government.
Saudi Arabia’s Track Record of Financial Stupidity
While investors may take Saudi Arabia’s investment in Carnival Corporation as a compelling vote of confidence, it’s probably just more in a long line of incompetence from the desert kingdom and its public investment fund. Saudi Arabia, along with its leader Mohammad Bin Salman, has a track record of poor financial decision-making.
In the fourth quarter of 2019, Saudi Arabia’s public investment fund sold 99.5% of its holdings in Tesla right before the stock rocketed to $900 — a move that could have cost them up to $4.5 billion in unrealized gains.
The country also IPO’d its state-owned oil firm Saudi Aramco for $1.7 trillion only to engage in an oil price war that tanked its value, leaving hundreds of retail investors holding the bag.
Now, the Saudi crown prince and his investment fund have their eyes set on Carnival Cruise. And it looks to be another high-profile flop.