‘Misleading’ Statements in Wake of COVID-19 Crisis Sank Royal Caribbean Stock Prices, Class Action Claims

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A proposed class action alleges Royal Caribbean issued between February 4 and March 17, 2020 (the class period) several false and/or misleading statements with regard to slumping cruise bookings outside of China and the company’s inability to contain the spread of coronavirus, harming the investing public. 

Filed in Florida federal court, the 28-page complaint claims Royal Caribbean’s assurances to investors about its ability to contain the virus and ostensible stability of overall customer bookings outside of China as the pandemic began to escalate turned out to be untrue. In truth, Royal Caribbean’s lack of adequate policies or procedures to control the spread of COVID-19 actually exacerbated the spread of the virus on its ships while the company claimed it was “[not] seeing a big impact on overall bookings,” the lawsuit says. 

“As a result of these misrepresentations, Defendants caused Royal Caribbean stock to trade at artificially high prices during the Class Period,” the lawsuit, filed by the City of Riviera Beach General Employees Retirement System, alleges, relaying that Royal Caribbean’s stock price fell back to earth after a series of corrective disclosures revealed the scope of COVID-19’s impact on global bookings and the defendant’s inability to contain the virus on its ships. 

On February 13, 2020, Royal Caribbean issued a press release in which it said it canceled 18 voyages in Southeast Asia due to travel restrictions, the suit says. In the release, Royal Caribbean also warned that although the early impact of the coronavirus mostly affected bookings in Asia, “recent bookings for our broader business have also been softer,” per the complaint. The lawsuit charges that Royal Caribbean, despite this warning, “conditioned” investors to believe its overall financial performance was relatively unscathed by the coronavirus pandemic. Upon the release of these statements, Royal Caribbean stock fell more than three percent over the following trading session, per the case.

Days later, on February 25, Royal Caribbean indicated in its 2019 Form 10-K filing that concerns about COVID-19 were negatively impacting its overall business, a disclosure that sent the company’s stock downward by more than 14 percent, the suit continues. In March, the effects of the pandemic on Royal Caribbean’s bottom line became even more evident, as the company withdrew its financial guidance for 2020, increased its revolving credit facility by $550 million and announced new cost-cutting measures, the lawsuit says.

“On this news, Royal Caribbean stock dropped more than 14 percent over the next trading session,” according to the complaint.

Royal Caribbean then announced on March 13 and 14 that it would suspend all U.S. cruises and global operations, respectively, for 30 days, the case reads. Upon this news, however, Royal Caribbean failed to disclose that resuming operations in 30 days was “unrealistic and impossible” given the company’s “inability to control the virus on its ships,” the lawsuit says. After a stock drop of more than seven percent, Royal Caribbean share prices fell even further when the company revealed global operations could be at a standstill for longer than first anticipated, per the case. 

The final dagger, the lawsuit relays, came when analysts downgraded Royal Caribbean’s stock and slashed target prices, an event that sent shares plummeting once more. Compounding matters was the fact that Royal Caribbean, shortly following the class period, was hit with two lawsuits centered on its apparent inability to protect crewmembers from the virus.

“These lawsuits alleged, among other things, that Royal Caribbean refused to allow crew members to wear masks, allowed crew to hold parties with long buffet lines, and required joint participation in drills even after operations ceased,” the complaint says. 

The suit’s filing brings Royal Caribbean into league with rivals Carnival Corporation and Norwegian Cruise Lines, who each face potential class action litigation alleging they issued materially false and/or misleading statements concerning COVID-19 that ultimately harmed investors. 

ClassAction.org’s coverage of COVID-19 litigation can be found here and over on our Newswire.

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