The operator’s Nasdaq-listed stock jumped 5.88% to $3.61 in the hours following an announcement in which it reminded investors that it “reserves the right” to reactivate the programme or pull the plug altogether at any time.
While the company did not shed light on the reasoning behind the decision industry observers believe the development suggests that a high-stakes campaign to overhaul loan covenants and efforts to plug a possible funding gap are starting to bear fruit.
“It means they aren’t desperate for cash,” added one well-placed market source. “It also suggests they expect the [dry-bulk and tanker] markets, and their share price, to continue to improve. If their needs change they can always reactivate [the ATM] later on.
“If you think your shares are going to tick higher, why would you sell now when there’s a good chance of raising more money down the road? In the meantime, investors don’t need to worry about dilution. Given positive [freight] rate forecasts, ‘wait and see’ seems to make sense.”
The ATM
DryShips made headlines in early October when it enlisted Evercore Partners, a boutique Wall Street investment bank, to oversee the periodic sale of up to $200m worth of shares under a broader effort to stabilise the operator’s financial health.
“Dry-bulk shipping rates and ship values have increased recently and we believe this trend will continue particularly in the larger asset classes,” Economou, the company’s chief executive, told investors at the time.
“Given the improved market backdrop, we believe this is an opportune time to flexibly access the equity capital markets to reduce some or all of our funding needs through 2014 that we currently estimate at $150m.”
More recently, the Greek shipping tycoonsaid DryShips would likely need to raise $130m in new equity, which was well below the estimate issued in the first and second quarters of 2013. Following today’s announcement, some believe the figure is now even lower.
Freight rates rise
Capesize and panamax bulkers, segments of the dry-bulk market to which the owner is exposed, have seen rates soar over the past few months and are now earning approximately $33,500 and $14,600 per day, respectively, in the spot market.
According to Global Hunter Securities today’s cape average is 15.9% higher than yesterday's and 54.4% above levels seen seven days ago. The gains have lent support to the Baltic Dry Index (BDI), which many investors use to gauge the overall health of the market.
