A lawsuit filed in Miami federal court claims that Norwegian Cruise Line, under the direction of two executives, lied to hide the effects the novel coronavirus would have on its business.
And, investor Eric Douglas’ lawsuit says, when media reports made the deception public Wednesday and Thursday, Norwegian’s stock lost over half its value in two days — from $20.50 per share to $9.65.
The proposed class action suit, representing anyone who bought NCL stock from Feb. 20 through Thursday, names NCL, CEO and President Frank Del Rio and executive vice president and Chief Financial Officer Mark Kempa as defendants.
Feb. 20 was the date of an NCL filing with the Securities and Exchange Commission that included a press release that, the lawsuit claims, “discussed positive outlooks for the Company in spite of the COVID-19 outbreak...”
Two of those statements named in the suit were:
▪ “Despite the current known impact from the COVID-19 coronavirus outbreak, as of the week ending February 14, 2020, the Company’s booked position remained ahead of prior year and at higher prices on a comparable basis.”
▪ “...our Company has an exemplary track record of demonstrating its resilience in challenging environments and we remain confident in our ability to deliver strong financial performance over the long-term.”
Another SEC filing on Feb. 27 contained the statement, “We place the utmost importance on the safety of our guests and crew,” but also acknowledged the damage a viral outbreak could do to business.
But, the lawsuit says, these were “materially false and misleading” statements because “the Company was employing sales tactics of providing customers with unproven and/or blatantly false statements about COVID-19 to entice customers to purchase cruises, thus endangering the lives of both their customers and crew members...”
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As first reported by the Miami New Times on Wednesday and confirmed Thursday by the Miami Herald, managers ordered salespeople to tell potential passengers falsehoods such as the coronavirus’ vulnerability to heat made the Caribbean a perfect place to take a cruise or that science said the virus couldn’t survive the spring.
After the New Times story, Norwegian’s shares fell from $20.50 to $15.03. By the end of Thursday’s trading, after the Herald story and one by the Washington Post, Norwegian’s shares fell from $15.03 to $9.65.
The lawsuit argues that the deceptive acts inflated Norwegian’s stock price and had investors known “they would not have purchased Norwegian securities at the artificially inflated prices that they did, or at all.”
Norwegian Cruise Line did not return a request for comment on Monday.