Friday, May 8, 2009

DryShips (DRYS) Joins the Dilution Parade

It is not just REITs and banks diluting shareholders hand over fist; we've seen companies in the industrials (Dow Chemical), metals (Alcoa, US Steel), among many other industries. Even our lowly Smith & Wesson (SWHC) did a dilutive offering yesterday! What is amusing is there seems to be no amount of reticence to buy and be diluted - it is seen as "good"! Some companies have done two offerings just in 2009 alone! So different than the era I grew up in, but we live with a new set of rules. Dilution means breathing room...

... while the long term means nothing to a market who concentrates 2 feet ahead of it, all these dilutive steps mean earnings PER share will be much harder to grow in the future.... suppressing valuations. But that's an argument for another day... it's ALL good now.

DryShips (DRYS) just announced a dilutive offering of quite magnificent size, about 40% dilution - with the company only down 15% that is a sign of approval. Again it makes the CEO's commentary A WEEK AGO [May 1, 2009: DryShips CEO: Dry Bulk Sector Oversold] about being ready to pounce on acquisitions (with the money they didn't have) even more bemusing but this market will lap up anything as "half full". Oh George, he is quite the character....
  • Greek dry bulk carrier DryShips Inc (DRYS) said it would offer common stock, its third such offering since November, and hopes to raise up to $475 million in an at-the-market offering.
  • DryShips, which had earlier raised $500 million in a similar offering announced in January, disclosed its latest offering in a filing with U.S. Securities and Exchange Commission.
  • Oppenheimer analyst Scott Burk downgraded the stock to "perform" from "outperform" and suspended the company's price target citing near-term weakness on this offering. "This is the company's third ATM offering since November, which has increased the share count from 43 million to 185 million currently," Burk said.
That last point is the same I made above... $XX income spread over 43 million shares is very different than $XX spread over 185 million. But that won't matter until it matters.... someday.

With a quite poor earnings report from TBSI International (TBSI) yesterday the dry bulk sector has been down the past few sessions but in this random market where "themes of the day" change every 72 hours; sure enough the drum beat of a return to global growth will be back soon. I had sold almost my entire Excel Maritime Carriers (EXM) a while back, so I am using this opportunity to begin rebuilding it (slowly) - only back up to about a 1% stake. EXM is just one of my 'trading stocks' and a proxy on fervor for global growth.

Long Excel Maritime Carriers, Smith & Wesson in fund; no personal positions

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