DryShips Inc. (NASDAQ:DRYS) stock skyrocketed by 120% to as high as $5.45 during regular trading hours today after the company said it completed its latest $200 million common stock offering. Volatility in this name is huge as it’s had a bumpy ride over the last year or so, including a period when the shares were halted after a 2,000% gain.
The struggling dry bulk carrier placed the shares at $3.08 each, bringing in $198 million in net proceeds. It’s just the latest episode in the long-running saga that is the company’s story of trying to stay afloat—literally.
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DryShips places stock offering
DryShips announced earlier this month that it had signed a definitive agreement with Sifnos Shareholders, which is controlled by its founder and chairman, George Economou. The company’s outstanding share count now stands at 36.25 million following the stock offering.
Also this month, the shipping company completed yet another reverse stock split, this time eight for one. The company has been performing many financial engineering moves to keep the doors open and keep its shares listed, as it completed another stock split in November at 25 to one and then a four to one reverse split in August. In March 2015, DryShips completed another 25 to one reverse stock split. The company’s plummeting share price means it must take repeated evasive actions in order to stay listed on the NASDAQ.
Also a lot of institutions require that a stock be priced at or above $5 per share in order to hold it in their portfolios, so DryShips is barely holding on to that level. If the stock falls again, there could be another reverse stock split on the horizon.
Shorting DryShips is expensive
The company’s heavy debt load is no help either, as many see bankruptcy as only a step or two away. It struck a debt agreement late last year and closed another direct offering, sending shares plunging.
Volatility in DryShips is extreme because the company’s float is low and it’s a popular short position, at least in terms of the number of shares that can be and are borrowed. The company’s market capitalization is only at around $61 million, and all the stock splits and everything else it has been doing make this short interest story a complex one.
At the end of the year, short interest in DryShips stood at $6.7 million, and investors shorted another 150,000 shares this month, according to data from financial analytics firm S3 Partners. However, the stock’s price has plunged so much that short interest stands at only $3.5 million on 742,000 shares being shorted, meaning that the increase in the number of shares being shorted was offset by the extreme decline in share price (based on $4.75 per share). With today’s gain, the dollar value of that short interest has risen, but it’s still below where it was at the end of 2016.
Few DryShips shares available to borrow
The small market cap means that some lenders won’t even lend DryShips shares, and according to S3 Partners, there aren’t many more shares left to borrow. Retail investors hold the shares, and they aren’t usually in stock lending programs, which means that these shares aren’t available to borrow. And what’s more, the shares that are still left to borrow are becoming more expensive. S3 tells ValueWalk that stock borrow fees on the name are ranging from 7% to 15%.