Despite the volatility registered by DryShips Inc. (NASDAQ:DRYS) in the last few sessions, the stock continues to remain an interesting bet for many investors. However, the experts are of the view that the overall trend in the stock is negative, and a cautious approach should be followed until the outcomes of restructuring are known.
The highlights
DryShips’ previous investors nearly got wiped out due to the reverse stock splits and decline in stock price. What the market is seeing now is a new firm with a new ownership. Its management skipped the bankruptcy proceedings and opted for other methods to start afresh. Usually, if the restructuring measures are successful, shares price will rise. Though, in DryShips’ case, the stock price has been declining consistently and in fact it is declined below $2.
If the company filings are analyzed from November 21, 2016 to January 9, 2017, it is evident that many things are happening. Closing bank loans via an associated party loan from Sifnos. Issuance of new stock and the alternative to further release shares worth $200 million in the next 2 years.
After the preceding reverse splits, shares due had come down to over 1 million. This figure has again surged above 33 million following the equity problems. This amounts to an added dilution of 97% for those investors who were left following the reverse stock splits. These shareholders had eroded most of their investment because of the reverse stock splits and consistently declining stock price. In this restructured firm, George Economou and new shareholders are the real winners. Here new shareholders indicate the entities that have obtained new shares in exchange for their financing or the investors that have the alternative of further award of stock.
The credit released to DryShips comes with a high interest rate of almost 7%, depending on the lowest LIBOR rates and it also offers the right to Sifnos to partake in the value appreciation of collateral.
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