DryShips Shares Jumped: What You Need to Know

By Anders Bylund | More Articles
August 29, 2011 | Comments (5)

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 DryShips (Nasdaq: DRYS ) jumped as much as 12.8% on moderate trading volume.

So what: This is a conflicted tale of good news and bad:

The crucial Baltic Dry Index, which tracks shipping costs, actually took a rest from weeks of continuous increases today
Bloomberg contends that Chinese shippers might be able to negotiate lower rates at this point, putting another lid on that Baltic Dry figure.
But none of that matters because Hurricane Irene didn't damage DryShips' oceangoing fleet nor its port assets, and on the whole, investors are pouring money back into this out-of-favor sector again.

Now what: Need I remind you that bulk shippers are volatile in general, and DryShips more than most? Over the last five years, DryShips shares have covered a price span from over $121 to below $2.20 per share and still sit close to the bottom end of that range, with dividends on indefinite hold and dwindling cash balances being propped up by rising debt. In fact, another reason why DryShips is moving faster than rivals Diana Shipping (NYSE: DSX ) , Navios Maritime (NYSE: NM ) , and Paragon Shipping (NYSE: PRGN ) today is that the company just secured the right to sell shares of its Ocean Rig UDW subsidiary, thus staving off balance sheet demons a little while longer. DryShips is a gamble, not an investment.

Interested in more info on DryShips? Add it to your watchlist. We won't judge.

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Fool contributor Anders Bylund holds no position in any of the companies discussed here. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool is investors writing for investors.

Read/Post Comments (5) | Recommend This Article (1)

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Report this Comment On August 29, 2011, at 4:35 PM, bojangles31 wrote:

An additional and perhaps more powerful reason for the move was that Dryships' exposure to the drilling sector allows it to move with the price of oil as all other drillers do. Because it has a higher beta, it moves more than most in the drilling industry. Combine that with its usual move with the general market, and there are two reasons for a push upward today that outpaced the market.
Report this Comment On August 30, 2011, at 12:08 PM, ColoredInvestor wrote:

Very true, after buying the Rig business that is definitely the case. Thank you for the other perspective Mr. BoJangles.
Report this Comment On August 30, 2011, at 4:00 PM, imacg5 wrote:

"In fact, another reason why DryShips is moving faster than rivals today is that the company just secured the right to sell shares of its Ocean Rig UDW subsidiary, thus staving off balance sheet demons a little while longer."
DRYS didn't announce an intention to sell any shares of Ocean Rig, they announced an exchange offer for the shares that were listed on the Oslo, Norway exchange. Those 28 million shares will be exchanged for 28 million shares to be listed on the NASDAQ.
Report this Comment On August 30, 2011, at 5:28 PM, TMFZahrim wrote:

Exactly, imacg5, the right to sell shares in a manner that benefits the company. I think we're talking about the same thing in different words.
Anders
Report this Comment On September 07, 2011, at 8:35 AM, imacg5 wrote:

No, we are not in agreement at all.
This exchange offer does not give them the right to sell shares of ORIG.
No money will be raised.
So this will not help the balance sheet.

When and if they sell shares they will have to file a prospectus, and any announcement by any company to sell shares is almost always met by a drop in share price.
The announcement is strictly that the shares will be traded on the NASDAQ.
We do agree that DRYS is a gamble and not an investment.
When there is a pop in this stock, it is advisable to take the profit, before the other shoe inevitably drops.

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