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Seaspan Shares Soared: What You Need to Know

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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 Seaspan (NYSE: SSW  ) surged more than 33% in early trading after the shipping services firm announced a plan to repurchase up to 10 million shares at $15 apiece, a 43% premium over yesterday's close.

So what: Management aims to restore confidence following a sharp sell-off in shares of not just Seaspan but a variety of shipping stocks, including DryShips (Nasdaq: DRYS  ) , Eagle Bulk Shipping (Nasdaq: EGLE  ) , and Paragon Shipping (Nasdaq: PRGN  ) . The difference, analysts say, is that most Seaspan clients are locked into long-term contracts. Guaranteed work protects against the oversupply and rate volatility issues that plague the rest of the industry at the moment.

Now what: Yet spending $150 million to repurchase shares at a premium might be overdoing it. After all, if the shares are cheap, wouldn't management create more value for shareholders by purchasing at a discount or increasing the dividend? Let me know what you think using the comments box below.

Interested in more information about Seaspan? Add it to your watchlist by clicking here.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool owns shares of Seaspan. Motley Fool newsletter services have recommended creating a write covered straddle position in Seaspan. Try any of our Foolish newsletter services free for 30 days. 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 has a disclosure policy.

Read/Post Comments (4) | Recommend This Article (12)

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 December 13, 2011, at 2:20 PM, Teacherman1 wrote:

    I could "kick" myself for what I "did not do" yesterday.

    I have them on my watchlist with a start price of $10.25. I saw them go down to $10.26, but thought they would drop down on their own.

    I have been "burned" a few times when I "reached" to grab a stock that got near my start price, so I set a rule for myself not to do it anymore.

    I guess in this case, I should have been a "Rule Breaker".:)

    Thanks for the article.

  • Report this Comment On December 13, 2011, at 2:47 PM, jbtheone wrote:

    Actually I think SSW handle this deal correctly, by offering a tender to purchase thier own stock this will enable them to purchase the Management company without issuing new shares and therefore diluting shareholders equity. By bringing in house the management company they will reduce cost and at the same time reduce the number of shares outstanding. This will allow them to raise the dividend without raising the cost. SSW has all of it's ships signed to long term leases, thus a fix income, as the market is uncertain they have no new ships being order (although they have options on several) Therefore to increase profits they need to reduce cost hence the purchase of the management company. As their stated goal is to increase shareholder value, this seems to work for me.

  • Report this Comment On December 13, 2011, at 7:20 PM, lighthouse11 wrote:

    i agree, but what about the fact that the outside management company being purchased for over $50 million is owned by the chairman and the CEO?

  • Report this Comment On December 13, 2011, at 8:13 PM, EscapePressEd wrote:

    As an investor who paid nearly $29/share for Seaspan in April 2007, $15/share doesn't seem so exorbitant. I would certainly have preferred increasing the dividend.

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Related Tickers

10/25/2016 4:02 PM
SSW $12.79 Up +0.05 +0.39%
Seaspan CAPS Rating: *****
DRYS $0.39 Up +0.03 +9.00%
DryShips CAPS Rating: **
EGLE $4.18 Down -0.24 -5.43%
Eagle Bulk Shippin… CAPS Rating: *