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Star Bulk Carriers Shares Plunged: What You Need to Know

By Matt Koppenheffer | More Articles
July 19, 2011 | Comments (3)

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of dry bulk shipper Star Bulk Carriers (Nasdaq: SBLK  ) were foundering today, sinking as much as 19% in intraday trading on heavy volume.

So what: There are a variety of ways for a company to raise money. Selling new shares is one of the ways that investors tend to like least. After yesterday's close, Star Bulk announced it was set to sell up to 19 million new shares of stock, which would increase the current share count by roughly 30%. Today, the company carried through on its promise, announcing that it had sold 16.7 million shares for $1.80 each. The underwriters of the deal still have the option of buying another 2.5 million shares.

Now what: The dry bulk sector in general has been a mess and investors have largely been steering clear of Star Bulk and its ilk. Could there be opportunity in the morass? Star Bulk CEO Spyros Capralos certainly seems to think so. He said he sees the company as "well positioned from a financial and operational point of view to take advantage of the current dislocation in the dry bulk market."

Perhaps that's the case, but it's still hard to be excited about a company selling a huge number of new shares while its stock is languishing in the dumps.

Want to keep up to date on Star Bulk Carriers? Add it to your watchlist.

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Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.


Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 19, 2011, at 5:13 PM, psl8er wrote:

    Why would any investors trust this company. It issues new shares in order to complete the acquisition of 2 ships from a related party at above market prices.In the process it dilutes its existing shareholders who have had a dismal time anyway with this badly managed company and the depressed share price drops a further 19%.

    THANKS management.

  • Report this Comment On July 19, 2011, at 11:58 PM, obiwan48 wrote:

    I'm sure the new shareholders/owners of the 16+ million shares are just tickled pink that they're already negative 10%.

    If you want to spook your long time core shareholders, you're doing a good job.

    Just remember, there's thousands of other companies out there that want or need investor funds.

    The financing of these two ships was badly mishandled.

    What was the value of the stock loss today? How much negative goodwill was created versus the potential income on the ships?

    Plenty in both cases.

  • Report this Comment On July 22, 2011, at 10:18 AM, animekenji wrote:

    But on the bright side it's good for bottom feeders who have never owned the stock before and weren't hurt by the recent price hits. Going forward this could be a good buy if you can get in at or close to the bottom.

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5/25/2012 3:59 PM
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Star Bulk Carriers CAPS Rating: ****

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