Cruising for Trouble: Activist Investor Elliott Chastises Norwegian Board for CEO Picks

It’s anything but smooth sailing for Norwegian Cruise Line and its new CEO. 

The company, which has struggled recently to keep up with rivals like Royal Caribbean and Carnival, announced last week that former Subway Restaurants chief executive John Chidsey was taking over as CEO, effective immediately. Stocks fell more than 7% on Friday after the news, and that wasn’t the worst of it. On Tuesday, activist investor Elliott Investment Management, which says it now holds a stake of more than 10% in Norwegian Cruise Line, sent a letter to the company’s board arguing that directors have failed to fulfill their duties — most notably, selecting the right leadership. 

CEO Woes  

“In 2015, the Board appointed a CEO whose tenure was defined by wasteful spending, misguided strategy and a share-price decline of more than 50%,” Elliott said in the letter. “The board then saw fit to appoint this CEO’s protégé, whose poorly executed strategic pivots and repeated guidance misses drove further underperformance of more than 140% relative to Norwegian’s peers.” 

Chidsey was certainly not spared: “Last week, shareholders abruptly received the troubling news that the same board that oversaw all of this value destruction had selected one of its own long-tenured members, who lacks any executive experience in the cruise industry, to be the company’s next chief executive.” 

In a statement to The Daily Upside, Norwegian said Elliott’s letter was its first feedback to the board on strategy and progress. “We are committed to delivering durable, long-term value creation, which will be led by our recently appointed CEO, John Chidsey,” the company added. Its next earnings call is March 2, and Reuters reports that the deadline for new board nominees is March 13.  

Elliott, which declined to comment beyond its press release and letter, seems to think it can turn this ship around: 

• The company proposed a variety of changes at Norwegian, including adding board members with relevant experience, reviewing the executive leadership team and developing a new business plan. 
• Elliott Partner John Pike and Portfolio Manager Bobby Xu, who signed the letter, said that they see a path for the stock to hit $56 per share, a roughly 159% increase from Friday’s close. (The shares surged 12% on Tuesday.)

Headed South: Norwegian isn’t the only travel company facing criticism from an activist investor. Starboard Value released a letter Tuesday that it sent to Tripadvisor, calling for a board shakeup and criticizing the site operator’s approach to generative AI. Starboard says it now has a 9% stake in Tripadvisor.