Investors who follow DryShips Inc. (NASDAQ:DRYS) know anything is possible with this stock. DryShips can double overnight or lose half its value in a matter of hours. This volatility is due to the unique and – some would say – unethical management strategy of the firm’s CEO, George Economou.
Kalani Investments Limited, a mysterious Caribbean-based investment company, is the primary tool at Economou’s disposal. He uses Kalani to buy shares from DryShips during the multiple dilutions, and he makes strategic cash infusions whenever DryShips runs low on money. It is impossible to prove Economou directly owns Kalani due to the secrecy of its tax-haven locale. However, Economou is well known for his self-dealing business strategy, and the actions of Kalani are consistent with Economou’s prior behavior.
Yesterday, Kalani Investments seem to have found a new target: TOP SHIPS Inc (NASDAQ:TOPS), a small shipping company with a portfolio of oil chemical tanker vessels. DryShips may be interested in these assets as part of its acquisitive growth strategy. Here is the statement from TopShips’ filing that made the stock double yesterday:
On February 2, 2017, the Company entered into a Common Stock Purchase Agreement with the Investor, for the sale of up to $3,099,000 of shares of the Company’s common stock that the Company may sell from time to time to the Investor, over the next 24 months. In accordance with this Common Stock Purchase Agreement, the Company issued 22,835 common shares as a commitment fee to the Investor. As of March 10, 2017, the Company has sold an aggregate 1,054,842 shares of its common stock to the Investor under the Common Stock Purchase Agreement, with the aggregate gross proceeds from the sale of $1,773.
On the surface, this looks like the same dilutive agreement DryShips made with Kalani earlier this month. However, the market seems to be sensing the possibility of a buyout, and shares in TopShips rocketed higher in response.
Update on the Dividend
On top of the buyout speculation, the DryShips dividend was announced yesterday, and it comes out to $0.017412/share quarter. This payment is a little bit over the $0.016 I predicted earlier this week.
The $0.016 dividend assumption was predicated on $2.5 million divided by 150 million shares outstanding. To figure out how many shares are actually outstanding today, we use the equation (2.5/x)=0.017412 and solve for ‘x’ to get a total share count of around 144.58 million. A 2.5-million-dollar dividend divided by 144 million shares outstanding comes out to an annual yield of a little under 4 percent on DryShips current stock price $1.83 on March 16, 2017.
This dividend is welcome news to shareholders who plan on holding DryShips long term, but the real story is dilution. DryShips managed to increase its common stock outstanding from 36.3 million shares outstanding to 144.58 million in a matter of months. No dividend will be able to make up for the value DryShips investors have lost due to the actions of George Economou.
DryShips’ mysterious investor, Kalani Investments Limited, has shown up in the financial statements of TopShips, another shipping firm. Rumors are swirling that Economou may be planning to acquire TopShips, something he previously attempted in 2008. TopShips fleet is made up primarily of oil chemical tankers, and these vessels can help DryShips diversify out of dry bulk.
DryShips has also announced the exact amount of its dividend, and it was slightly higher than I predicted earlier this week. The dividend comes out to $0.017412 per share, and this represents a yield of a little under 4 percent annually. Total shares outstanding are 144.58 million – up from 36.3 million at the time of last earnings report in February.
The stock is taking recent developments positively, and this may shape up to be a compelling near-term catalyst for upside.
Disclaimer: The author has no positions in the stock mentioned. This article is intended for informational and entertainment use only, and should not be construed as professional investment advice.