DryShips (DRYS) - the Greek shipping company that seems to elude reason itself. This company is quite infamous to investors who know about it, or even to those who peripherally watch its stock ticker. To put it bluntly, investors have been on a roller coaster of record lows and insane highs. But, for those who actually take the astronomical risk in investing in DryShips, might actually know the deeper reasons for investing. In this article, we’ll dissect DryShips to gain an unbiased perspective on just what this company is. First, let us take a look at the first thing we would check before investing in a company – the stock price. As of 2/23/2018, its stock price is $3.42. Not necessarily a penny stock per say, but certainly a puzzling price for a shipping company that owns over 30 shipping vessels. This price is not an all-low for the company, as it has been trading in the ~$1-5 range from early 2017 to 2018. To say the least, there have been worse times for DryShips. However, a price of $3.42 is merely a crumb compared what it was at its peak at its first public offering in 2004 - $234,020,000.
Yes, this is a shockingly high price for a publicly traded stock. But there is a reason behind it– the company never followed through with a stock split until 3/2/2016. For those who may not know what a stock split is, the term is simply self describing. A stock may be split to ½ , ⅓ , or any fraction of the prior price of the stock. Stock splits are usually attempts to garner more investors by making the company’s shares cheaper. Conversely, a reverse stock split has the exact opposite effect in that they make the company’s shares more expensive.
And, as I stated before, DryShips was splitting their stock in an attempt to attract a greater number of investors. At this point, DryShips was in dire straits. The global oceanic shipping industry had suffered greatly from the 2008 recession onward, and DryShips was unfortunately one of the most affected. For nearly eight years, the company had been blowing through cash and racking up absurd amounts of debt in order to stay afloat. So, in order to gain more capital to support the survival of the company, they have split their stock a total of 8 times.
In comes the stock ‘dilution’. Put bluntly, dilution occurs when a firm needs to raise capital and has exhausted all other options, so they will issue more shares to investors. In layman’s terms, this just means that the firm is selling off more chunks of the company. Alas, this is always bad news to investors. But dilution in this case, as in many others, is a strategic move. DryShips was on the verge of bankruptcy, and even going completely out of business, by 2016. So by diluting their shares, DryShips has so far managed to survive since then.
DryShips has also turned to other, more unorthodox methods of financing the company. Bring in George Economou, DryShips’ controversial CEO. George Economou is a Greek billionaire who has been in managerial control of DryShips since 2004, and has largely made his fortune off of the company even at its most despairing times. By and large, he is not lauded by part-time investors - in fact, the opposite. He has been criticized for making profit off of the company while shareholders have been losing constantly for years. But bad press has not stopped him from saving the company from the abyss. This man, who has been sued by disgruntled shareholders, has personally put hundreds of millions of dollars from his own wallet into the company. He has purchased 10 tankers from the company for the price of $536 million, 20 drybulk carriers for $335 million, and has even bought the remainder of the company’s debt – $160 million.
And so today DryShips still stands, although it may be a mere shadow of its former self, but standing nonetheless. It is true that its stock price has seen worse days, as its all-time low was at a measly $.98 in 2016, but it is also fair to say that it is on death’s door. Massive selloffs by influential shareholders have rocked the company, and the stock has been receiving ‘strong sell’ ratings by multiple financial firms so far this year. But if DryShips does sink to the bottom of the ocean, it will surely go down as one of the most notorious publicly traded stocks in history.
Sources:
“DryShips Inc.” Accessed February 24, 2018. http://www.marketwatch.com/investing/stock/drys.
“History / About DRYS / Dryships Inc.” Accessed February 24, 2018. http://www.dryships.com/about-drys/history.
Jensema, Caleb. “Investing In DryShips Is A Dangerous Game At Best.” Seeking Alpha, February 12, 2018. https://seekingalpha.com/article/4145567-investing-dryships-dangerous-game-best.
Staff, Investopedia. “Dilution.” Investopedia, November 25, 2003. https://www.investopedia.com/terms/d/dilution.asp.
Staff, Investopedia. “Stock Splits” Investopedia, August 9, 2005. https://www.investopedia.com/ask/answers/stocksreachveryhighprices.asp.
