DryShips Inc. (NASDAQ:DRYS) stock tanked yet again on Friday as the company’s management tries another desperate Hail Mary pass reverse stock split to keep the price high enough so the company will remain listed on the NASDAQ. The shares are fresh off a 52-week low of 72 cents per share, and it’s unclear whether management will ever be able to keep the company from sinking.
reverse stock split Dryships Inc DRYS By Greg Goebel from Loveland CO, USA (Yigtp_1b) [CC BY-SA 2.0], via Wikimedia Commons
Apollo Global is no longer the “king of distress”: Josh Harris
DryShips announces reverse stock split
DryShips announced plans for a one-for-four reverse split, meaning that investors will receive one share for every four shares of the company they own. This will plunge the number of outstanding shares from about 152 million down to 40 million. The company won’t issue any fractional shares when it completes the reverse split.
Management expects the reverse split to go into effect on April 11, which explains why so many investors have decided to, well, split, while they still can. DryShips stock tanked by roughly 29% during regular trading hours on Friday, and this decline follows another on Wednesday. In fact, the shares have been plunging steadily, and there seems no end to the lengths the company is willing to go to dilute its shareholders.
This next reverse stock split is the fifth such split in the last 13 months. Just one week ago, the company announced another dilutive move, a $226.4 million continuous stock offering with Kalani Investments. In January, the company completed a one-for-eight reverse stock split, and then in November 2016, it finished a one-for-15 split. DryShips also did reverse splits in March 2016 and August 2016.
Short interest in DryShips skyrockets
With all these dilutive moves, it should come as no surprise that short interest in the company has skyrocketed this year. DryShips has been a popular short position for quite some time, and according to Ihor Dusaniwsky, research head at the financial analytics firm S3 Partners, short interest has climbed more than 150% year to date already.
He told ValueWalk earlier this week that there isn’t much stock left to borrow, although he added that supply was easing a bit because the barrow rate fell from 56% in early March to 19% on Monday. The shorts were up $23.3 million so far this year or 122.28% on an average short of $16.6 million. From Monday’s decline alone, short-sellers made $3.7 million. Dusaniwsky suggested earlier this week that the price drop could cause some short-sellers to lock in their gains by covering their positions, although given the continual downward march, they might want to let their positions ride.
Although reverse stock splits are usually done to keep the price of a stock high enough to fulfill listing requirements, a sort of side bonus here is that it makes the shares harder to borrow, something DryShips could also benefit from because of the high short interest.