DryShips, Inc. (DRYS)

“It was surreal. When someone asked why he was doing the deal, here–now, he actually said, basically, ‘Because Americans are the dumbest investors around, and there’s lots of liquidity in this market.’”

CEO Dryship, George Economou

The secondary offerings, plus the testing of the stupidity aka enthusiasm of the market with another "drybulk" shipper. Safe Bulkers (SB), a company with a record of FOUR EMPLOYEES! Unlike DRYS which has TWO EMPLOYEES! LOL!

http://finance.yahoo.com/q/pr?s=SB

http://finance.yahoo.com/q/pr?s=DRYS

Here is my post from 20 May 08.

I am not in the "dry bulk" industry. I have done my share of world traveling and I have never seen a shortage of ships. There are always plenty of ships parked outside the port waiting/hoping for a charter. If there was a temporary shortage, it is going to be cured by the severe recession in bound to the US and a slow down in the US' debt ridden, over leveraged, “consumption based” economy. ( ref Consumer Sentiment: Is the Worst Yet To Come?) The ships that are being built or utilized currently are getting ready to be parked and transformed to barnacle rust collectors. Many of their owners will cash out and file bankruptcy (George Economou's Alpha shipping, again?).

There is a reason many Top Fools gave Dryships an Underperform. You can take your pick of article and realize how funny this company is.

Curious George
Nathan Vardi 02.25.08, 12:00 AM ET

http://www.forbes.com/forbes/2008/0225/095.html

World's Scariest Stock: DryShips
http://www.fool.com/investing/small-cap/2007/10/29/dryshi......

Dryships’ Debut Shows Speculation,
Liquidity Trumping Experience
“It was surreal. When someone asked why he was doing the deal, here–now, he actually said, basically, ‘Because Americans are the dumbest investors around, and there’s lots of liquidity in this market.’”
http://www.weedenco.com/welling/archive/sb/v07i04sblogo.asp

There is a major commodity bubble. When it pops the first to get taken out will be the leveraged, cash short and the stupid, which includes many in the "Drybulk" sector.

Many think “drybulk shipping” is a commodity play. It is a consumption/transportation play. As the consumption, spending, construction slows so will this sector. Many of these shippers were single digit stocks three years ago, they will return there once the bubble burst.

A highlight from: Curious George

"Who are my investors? Computer models, hedge funds and some institutions that go in and make $10 and get out." So much for consensus. DryShips has been operating with two employees (Economou, 54, and his internal auditor) since his chief financial officer quit in May, the second to split in three years. The company's fleet is managed by Cardiff, 70% owned by Economou, which gets more than $7 million a year for its troubles.

"A family business, this. Economou's two former wives own a total 15% of DryShips. Chryssoula Kandylidis, his sister, holds 30% of Cardiff Marine. With proceeds from its initial offering, DryShips bought six ships that had recently been picked up by Kandylidis. Five were sold at cost, but DryShips paid his sister a $3 million fee. Economou says she made very little money on the deal and bore great risk.

Kandylidis' son, Antonios Kandylidis, is also in this cozy network. The 30-year-old Antonios is the founder and largest shareholder in OceanFreight (nasdaq: OCNF - news - people ), which raised $218 million when it went public on the Nasdaq last year. Cardiff helped OceanFreight pick up its first dry-bulk vessels, helps manage that fleet and shares office space with OceanFreight.

A rocky maiden voyage. OceanFreight had to clarify its reporting in October, announcing third-quarter earnings per share were really 7 cents as opposed to the 11 cents it had advertised a day earlier. In December Antonios fired his chief executive, who says he intends to sue for wrongful termination. Then OceanFreight's chief financial officer quit; Antonios took over both the executive roles. Within days of the fuss OceanFreight announced it was buying the first of two tankers privately owned by Economou for $112 million."

Of interest also many dry bulk shippers are unloading shares on the stupid:

Secondary Offerings, Debt, and Defaults

Minyanville Professor David Nelson and Minyan Peter were talking about secondary offerings today. Let's take a look.

Professor Nelson: Shipping Secondaries

One by one the Dry Bulk Shippers are reporting blow out quarters. However, another pattern seems to be developing under the surface. Shortly after reporting and getting a big bump from the EPS reports, they've been announcing secondary's. Last week it was TBS International (TBSI) and this morning it's Genko Shipping (GNK).

This stock is a scary rip off. Here's some information on what's going on behind the scenes...

speaking about his epic 194 page prospectus Kathryn Welling gets into detail...

The candid if legalistic disclosures in the document run the gamut from the mildly spicy (both Mr. Economou’s wife, and his ex-wife, through separate Liberian corporations, called (respectively) Advice Investments and Magic Management, are listed with him as principal shareholders in Dryships), to the familial: Among the first vessels Dryships planned to buy with the offering proceed were six owned by companies controlled by Economou’s sister. Likewise, both Cardiff Marine, the affiliated Liberian-registered shipping management company that will actually handle Dryships’ operations, and Drybulk, S.A., its Liberian-registered broker for charters and ship trading, are strictly family affairs. Economou owns 70% of each through something called the Entrepreneurial Spirit Foundation, a Liechtenstein entity he controls. (This same foundation acquired 70% of Dryships, pre-offering, in exchange for transferring effective ownership of its initial six-ship fleet to the IPO company). Meanwhile, the other 30% of both Cardiff and Drybulk are held by his sister’s Prestige Finance S.A., yet another Liberian entity.

The prospectus for Dryships (a company Economou formed, perhaps for variety’s sake, in the Marshall Islands) is rife, in other words, with convoluted related party transactions.

Not that it isn’t up-front about them. Take the fact that Dryships has only two employees, its CEO and a CFO, and so will conduct virtually all of its operations through Cardiff, which Economou created back in 1991. It’s right there, under risk factors, on page 12. And all that a prospective shareholder had to do was flip to the top of the next page to learn, “you will have no recourse against Cardiff.” A little farther down that same page, furthermore, some fairly standard boilerplate verbiage about Economou’s stakes in both Cardiff and Dryships creating potential conflicts of interest is capped with an unusually blunt warning that blood is thicker than water: “Cardiff may give preferential treatment to vessels that are beneficially owned by related parties because Mr. Economou and members of his family may receive greater economic benefits.”

Link to full story: http://www.weedenco.com/welling/archive/sb/v07i04sblogo.asp

I personally love the last statement because it simply states it like it is. I will be giving my family preferential treatment because I get more money if I do. Seriously anyone who is long this stock better get short real quick. If you have any doubt as to what happened with the CEO's last venture just so a little bit of research on Alpha Shipping Plc. This is certainly going to be good for a hammer charm for anyone who stays here long enough. The fall will likely be sharp sudden and without warning.

On May 29, 2009 at 11:30 AM, willmaster01 (99.10) wrote:

My pick is DRYS!!! I know its risky but I'll stand by it for now. This time frame is 6 months.

Recent share issuances 41% of all outstanding shares are shorted.. what happens then those expire!?! They will too.

US $$ goes down. exports increase ships will be needed.

Much more details to be said.

all the shipping company is undervalue. With shipping rate going higher, it is still trading less than 8 times next year earning. I predict it will go back up to it's all time high within 6 months.

EPS is around $20/share, P/E is about 1. This is the textbook case of a stock being severely undervalue. High beta of ~3.4 means higher risk, which is unattractive to short run investors, but for one to two year investors, this is a must. A stock like this is correlated with the Baltic Dry Index, which has been tanking horribly with the financial crisis. But the BDI will recover, as shipping rates are the leading indicators of recovery, and so DRYS will go up in lockstep. 6 MO Target Price of 50 to 605, 12 MO Target Price of 85-95.

My advice: Buy below 30, stick it in a deep, dark corner where you can't see the daily swings of 10-15% and look at it again in the summer.

DryShips Inc. announced that it has purchased 33,254,576 shares of Ocean Rig ASA at a price of NOK 45 per share. Following these transactions DryShips Inc. owns 49.9% of the shares and votes in Ocean Rig ASA. As advised on December 17, 2007 Mr. George Economou, Chairman and CEO of DryShips Inc., has separately acquired approximately 4.4% of the share capital of Ocean Rig ASA. As a consequence of the acquisition, DryShips Inc. will commence a mandatory tender offer for the remaining outstanding shares in Ocean Rig ASA within the four weeks deadline set by Oslo Stock Exchange rules. DryShips Inc. will use a combination of cash on hand and debt financing which is already in place to acquire the remaining outstanding shares of Ocean Rig ASA.

Don't you guys remember last time we all thought drys was going to die? That's right, it turned into one of the craziest short squeezes ever. Top Fools lost thousands of points. Logic is completely unreliable when it comes to this company.

IT'S TIME TO GET BACK INTO THE DRY BULK SHIPPERS; THEY HAVE ALL COME IN SIGNIFICANTLY AFTER RECOVERING NICELY FROM THEIR JANUARY LOWS.

DRYS IS BY FAR THE CHEAPEST OF THE BUNCH, TRADING JUST BELOW 5 TIMES TRAILING EARNINGS. IN A CNBC INTERVIEW THE CEO MENTIONED THAT EVEN WITH THE RECENT PULLBACK IN THE BALTIC DRY INDEX (BDI), THE COMPANY IS MAKING $100K A DAY ON $6K OF EXPENSES, THAT'S WHAT I CALL A HEALTHY MARGIN. THE COMPANY IS AT THE EPICENTER OF THE GLOBAL COMMODITY BOOM AND SHOULD CONTINUE TO BENEFIT FROM RISING GLOBAL DEMAND. ADD TO THAT A NEARLY 30% SHORT INTEREST ON OVERBLOWN FEARS AND MISINTERPRETATIONS ABOUT THE COMPANY AND YOU GET A POWERFUL RECIPE FOR PRICE APPRECIATION, I EXPECT THE STOCK TO TRADE BACK UP TO THE MID 70S TO MID 80S.

HERE ARE INTERESTING ARTICLES:

1.http://seekingalpha.com/article/68565-dryships-deserves-more-love?

2. http://seekingalpha.com/article/65957-drys-shipper-of-the-global-commodities-boom?

3. http://seekingalpha.com/article/69017-dryships-increasingly-valuable-fleet-of-vessels?

4. http://seekingalpha.com/article/68735-dryships-undervalued-compared-to-competitors-and-the-market?

The hardest lesson I have ever learned in the stock market is that the performance of the company has nothing to do with the price. I own stocks now that have announced double profits yet the stock still goes down 5% on the same day.

Personally, I think this stock is way over valued. The shipping industry as a whole is making record money and people know it. Yes, the company is ran by idiots, but that still doesn't defeat the fact that it can make me money. Two years, yes the stock will fall, and hard. But for the short term, as long as this stock stays in the headlines I think it will still keep going up.

One of the leaders if not THE leader in the bulk shipping industry. It flew the highest during the good times and has suffered an equal amount over the last 6-8 months. It does have a lot of debt but, carries a huge book value as well. I believe it will be well positioned when the commodities markets resume there upward climb.
You do believe the market will return normal don't you?

Earnings are the key, and the company's estimate, and analysts estimates, are extremely good for the next year. And according to worlwide dryship shipping CEOs, the future looks very good, particularily with the growth in China and India.

A leader in Dry bulk and strong management.
Recent 30% investment into RIG was a master stroke in my opinion. Oil is becomming harder to find RIG expertese in this field will directly help DRYS investment cashflow.

Drys will look to grow and i expect acquisitions .
II cannot understand the drop in price of DRYS if you look at the demand comming from China, India and many other emerging economies, the recent drop in price of ther BDI index is no more than a over bought trading drop. I expect DRYS to do very well over the next few years

This baby is going to bankruptcy. The CEO is crooked, and directly owns a competing company.

Tell me how this ends well?

Down to the bottom!

Well, I have the distinct LUCK of coming to CAPS just this month and coming to research Dry Shipping stocks NOW [EXM, QMAR, TBSI].

So many of you pioneered on this one and have been early and watching your picks suffering for it these past months...doesn't seem fair that a newbie like me gets to jump-in NOW does it? But as my Profile says, I'm known for 'seeing things coming' but also for being infamously early and then the question becomes can I hold-on and ride it out until I'm ultimately proven prescient.

Maybe my luck in timing just this once will hold and my piling-on here will be the signal that you folks who've been so patient will finally begin to see the real rewards. Good things really does come to those...who have to just hold-on by their fingernails sometimes!

I keep typing it and here we are again: Folks, I can't help feeling we're up to our chins in modern-day Robber Barons. May our universe deal the Economou's back EXACTLY what they deserve.

Shady business practices and the recent blog by Tastylunch on the overcapacity of bulk ships should eventually cause downward pressure on the stock price. Since bankruptcies are likely to happen in this industry, the ones with the bigger debt would be the first to die.

The BALTIC DRY INDEX has been in a free fall since October. This has forced the price down on all dry bulk shippers. I this fall is over done and ending. DRYS has a 120 to 160 potential.

Crappy at best company.

Oversold. Even DRYS is not the best in the segment, this kind of transportation over sea is cheap and WILL BE needed .-)

LOADED up with debt, this boat is sure to sink....