The NASDAQ resumed trading on DryShips Inc (NASAQ:DRYS) on Thursday, and immediately the stock began tumbling. The stock exchange halted trading on DryShips after the stock skyrocketed 2,000% in a matter of days. This is one stock that’s certainly had a history over the last year, as just a simple check of two metrics showcases just how extreme the volatility in it has been over the last year.
DryShips’ 52-week low is $3.84, while its 52-week high is $435.90. Today the shares are down by about 80% at $14.64 after having gone screaming along for most of this month. In addition to the NASDAQ’s trading halt related to the information request, the stock has been halted for high volatility multiple times since the election, which kicked off a frenzy in shipping stocks due to Donald Trump’s win.
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DryShips announces fresh offering
The NASDAQ halted trading on the stock on Wednesday before the market opened, saying that it had requested information from the company and that it would not resume trading until its request had been fulfilled. After trading resumed, the Athens-based shipping company announced that it had entered into a Securities Purchase Agreement with Kalani Investments Limited.
Kalani agreed to buy 20,000 new Series E-1 Convertible Preferred Shares, preferred warrants to buy 30,000 Series E-1 Convertible Preferred Shares, preferred warrants to buy 50,000 new Series E-2 Convertible Preferred Shares, prepaid warrants to buy initially nearly 373,000 common shares, although the number is subject to adjustment, and 100 common shares. DryShips also said that Kalani was entitled to receive 10,000 common shares but instead chose to receive 100 common shares and a prepaid warrant that can be exercised immediately for 9,900 common shares.
The company is raising about $20 million through the direct offering to pay down its debt. It could see an additional $80 million if Kalani exercises all of its preferred warrants, and this is one company that’s in desperate need of cash, as Yahoo Finance shows its debt-to-equity ratio at 6,281. Of course DryShips is not alone, as The Wall Street Journal reports that many dry-bulk shippers have filed for bankruptcy this year as they’ve had to idle some of their ships.
DryShips has a storied history
There’s much more than meets the eye when it comes to this registered direct offering. DryShips has been struggling to even keep its stock listed. The NASDAQ sent the company a delisting warning last year because of how low its stock price had gotten. As a result, the company conducted three reverse stock splits that greatly reduced the number of its outstanding shares.
The first one granted investors one share for every 25 shares they had in March, which slashed the company’s outstanding share count from about 672 million to about 27 million. Because its stock price kept plunging, DryShips conducted two more reverse stock splits, with the second being a one-for-four reverse split in August and the third coming this month in the form of a 15-for-one split. After all three of the reverse splits, the company had shrunk its outstanding share count to roughly 1 million.
Meanwhile it continues to work with its creditors and is undergoing restructuring. DryShips sold one of its vessels to pay off some of its debt.
Baltic Dry Index soars to highest level in more than a year
One of the leading theories on why the stock soared so high so fast is a short squeeze, although not everyone believes that. S3 Partners’ Ihor Dusaniwsky believes it’s a matter of supply and demand, as the company’s share count is down to 1 million, and he posits that a bidding war has ensued. He said there just isn’t enough shares of DryShips to be borried and that short interest stood at less than half a percent of the shares that have changed hands in the last four days.
Indeed, demand for dry-bulk shipper stocks has gone through the roof since Trump’s surprise election, and the Baltic Dry Index has shot through the roof. The index measures commodity shipping prices, and in February, it reached its lowest level ever in the 31 years since it was started. It was at that time that dry-bulk shippers began having financial problems, filing for bankruptcy protection and idling ships. Then since the election, the Baltic Dry Index climbed to its highest level since August 2015.
And it seems that what goes up must come down, as the dry-bulk shipping industry is tumbling en masse, with Diana Containerships, Globus Maritime, Euroseas and others joining DryShips in freefall today.