04-24-2009, 08:24 AM
Some info about Drys in the middle.
Hope blossoms for dry market
A change of mood is in the air and it seems investors are again taking the plunge.
It would be nice to be able to get carried away by the new dry-bulk boom - as welcome a sight as the cherry blossom on the trees this spring.
The Baltic Dry Index (BDI) has been going through a very positive period amid signs that Chinese demand is returning for many commodities and politicians up to and including the US president are openly optimistic about the global economy.
Green shoots of recovery, indeed. Capesize rates are now 10 times what they were in November and a leading dry-bulk operator has been able to raise half-a-billion dollars on the stock market for his group, which logged a $1bn loss in the last quarter of the year.
There has undoutedly been a change of mood around all the markets. Higher-than-expected profits at bellwether US investment bank Goldman Sachs, coupled with a commitment to pay back money borrowed from the US taxpayer, is a very powerful message that the worst of the banking crisis really does appear to be over.
Federal Reserve boss Ben Bernanke was not going overboard but for a central banker to comment on "tentative signs that the sharp decline in economic activity may be slowing" is as close as it comes to blatant optimism.
Key indices such as the Dow Jones STOXX 600 index of large, medium-size and small companies have risen 20% month on month, the oil price has been trending upward and there is a new bounce about Wall Street, albeit that nervousness still abounds.
It was in this atmosphere of renewed investor confidence that Greek shipowner George Economou was able to make his move. "Given the status of the world economy, the fact that we have successfully raised $500m of primary equity is a testament to DryShips's ability to tap the capital markets at any moment in time," he boasted.
Of course, what he did not say is that the 95 million new shares were issued at $5.26 each - and yet this is a company whose stock was worth $116.43 less than 12 months ago.
Investors have had to put up shares diluted four times in value, something that appears to have put DryShips's balance sheet back in some shape but it is not something anyone would do too lightly.
Analysts at Oppenheimer in New York also point out that Economou might have to come back for more money and further dilute the value of shareholdings, as he must decide what to do with $1bn-worth of drilling-rig orders.
In fact, the losses at DryShips have primarily been caused by the decision (grossly unwise, in hindsight) to buy an offshore business, Ocean Rig, at the top of the market. Meanwhile, DryShips's 43-ship fleet, including 29 panamaxes, has been performing relatively well.
Oppenheimer is optimistic about freight rates ahead and predicts that DryShips could see its shares hit $8. Things certainly look brighter with a 36% rise in panamax spot rates last week and further gains in recent days.
Capesize rates have also been up on the back of stronger demand for iron ore from China, as the world's most populous nation benefits from a CNY four trillion ($600bn) economic-stimulus package.
All the signs are far more positive at the moment but no one should get carried away. The bounce-back in freight rates comes from very low levels and the vast majority of listed dry-bulk operators are trading at way below net asset value (NAV).
It is always a bit depressing for management to go into the office in the morning knowing their company would theoretically be worth more if they sold the fleet and went off to play golf in the Algarve. But those green shoots are not just on the fairways or around the roots of cherry trees. There is hope in the air.
Hope blossoms for dry market
A change of mood is in the air and it seems investors are again taking the plunge.
It would be nice to be able to get carried away by the new dry-bulk boom - as welcome a sight as the cherry blossom on the trees this spring.
The Baltic Dry Index (BDI) has been going through a very positive period amid signs that Chinese demand is returning for many commodities and politicians up to and including the US president are openly optimistic about the global economy.
Green shoots of recovery, indeed. Capesize rates are now 10 times what they were in November and a leading dry-bulk operator has been able to raise half-a-billion dollars on the stock market for his group, which logged a $1bn loss in the last quarter of the year.
There has undoutedly been a change of mood around all the markets. Higher-than-expected profits at bellwether US investment bank Goldman Sachs, coupled with a commitment to pay back money borrowed from the US taxpayer, is a very powerful message that the worst of the banking crisis really does appear to be over.
Federal Reserve boss Ben Bernanke was not going overboard but for a central banker to comment on "tentative signs that the sharp decline in economic activity may be slowing" is as close as it comes to blatant optimism.
Key indices such as the Dow Jones STOXX 600 index of large, medium-size and small companies have risen 20% month on month, the oil price has been trending upward and there is a new bounce about Wall Street, albeit that nervousness still abounds.
It was in this atmosphere of renewed investor confidence that Greek shipowner George Economou was able to make his move. "Given the status of the world economy, the fact that we have successfully raised $500m of primary equity is a testament to DryShips's ability to tap the capital markets at any moment in time," he boasted.
Of course, what he did not say is that the 95 million new shares were issued at $5.26 each - and yet this is a company whose stock was worth $116.43 less than 12 months ago.
Investors have had to put up shares diluted four times in value, something that appears to have put DryShips's balance sheet back in some shape but it is not something anyone would do too lightly.
Analysts at Oppenheimer in New York also point out that Economou might have to come back for more money and further dilute the value of shareholdings, as he must decide what to do with $1bn-worth of drilling-rig orders.
In fact, the losses at DryShips have primarily been caused by the decision (grossly unwise, in hindsight) to buy an offshore business, Ocean Rig, at the top of the market. Meanwhile, DryShips's 43-ship fleet, including 29 panamaxes, has been performing relatively well.
Oppenheimer is optimistic about freight rates ahead and predicts that DryShips could see its shares hit $8. Things certainly look brighter with a 36% rise in panamax spot rates last week and further gains in recent days.
Capesize rates have also been up on the back of stronger demand for iron ore from China, as the world's most populous nation benefits from a CNY four trillion ($600bn) economic-stimulus package.
All the signs are far more positive at the moment but no one should get carried away. The bounce-back in freight rates comes from very low levels and the vast majority of listed dry-bulk operators are trading at way below net asset value (NAV).
It is always a bit depressing for management to go into the office in the morning knowing their company would theoretically be worth more if they sold the fleet and went off to play golf in the Algarve. But those green shoots are not just on the fairways or around the roots of cherry trees. There is hope in the air.