Norwegian Cruise Line (NCLH) surges as activist Elliot takes big stake

Shares of Norwegian Cruise Line Holdings (NCLH) surged more than 12% after prominent activist investor Elliot Investment Management said on Tuesday that it has built a more than 10% stake in the struggling company.

Elliot, which now becomes one of Norwegian's largest investors, said in a letter to the board of directors that "Norwegian’s underperformance reflects more than a decade of strategic misjudgments and poor execution, left unaddressed by a Board that has neglected its oversight responsibilities."

The company's stock fell about 13% in 2025 and has been one of the worst-performing stocks on the S&P 500 over the last five years.

Since the end of the Covid-19 pandemic, which shut down cruise ships for about 15 months in 2021, consumers have shown a strong appetite for travel again, creating "powerful secular tailwinds, including limited capacity growth amid surging demand" for the cruise line industry, Elliot said.

But Norwegian is lagging behind its competitors, including Carnival Corporation (CCL) and Royal Caribbean Cruises (RCL). According to Elliot, the company's shares have underperformed those of Royal Caribbean by more than 400% over the past five years and Carnival by more than 60%.

Nonetheless, the board approved $111 million in CEO compensation during that period of time.

“The Company has repeatedly pursued initiatives misaligned with industry trends and customer preferences – while competitors have seized opportunities to drive superior growth and profitability,” Elliot said.

As part of its new stake in the company, Elliot included a presentation called "Norwegian Now" that calls on Norwegian to make a comprehensive board change, conduct a management review, and develop a new business plan that "delivers on available revenue opportunities, restores cost discipline and achieves industry-leading profitability and return on invested capital."

The firm notes that Norwegian was one of the first cruise line operators to acquire a private island in the Caribbean, but claims that the company's leadership "inexplicably neglected this transformative opportunity, even as private island destinations became a key driver of customer demand and returns across the industry."

Norwegian owns Great Stirrup Cay in the Bahamas, which is one of the biggest private islands in the industry. However, the company has been criticized for not moving quickly enough with its development plans for the island.

Elliot said that while Norwegian has tried to course-correct, its attempts to pursue development have been "rushed and mismanaged."

"Norwegian is now redeploying capacity to the Caribbean, but well ahead of the completion of key amenities required to fully monetize its private island," Elliot said. "This stumble has created further near-term revenue headwinds and is yet another example of poor strategic execution on the same strategic objectives that have driven results for its peers."

A proxy fight could be on the horizon

Norwegian announced last week that Harry Sommer had stepped down as president and CEO, effective immediately, and was replaced by John W. Chidsey, who has been a board director for a number of years. Chidsey had previously served as chief executive of Subway Restaurants for five years.

In its letter, Elliot criticized the performance of the last two CEOs - including Sommer - and accused the board of having “failed to fulfill any of its fundamental responsibilities, including its most important obligation – to select the right leadership."

The firm doesn't sound confident with the appointment of Chidsey either, saying that "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."

“Our board of directors and management team regularly engage with our shareholders to hear their views on our strategy and progress, and we appreciate their perspectives," a Norwegian spokesperson told the Wall Street Journal. "Of note, this is the first we are hearing from Elliott Investment Management.”

In the closing of its letter, Elliot appears to indicate that it is ready to run a proxy fight in order to make the changes it wants to see happen.

"While our preference is to reach a constructive resolution, we are prepared to take our case directly to shareholders at the Company’s upcoming annual meeting," the firm said.