DryShips' (NASDAQ:DRYS) primary focus this year has been on rebuilding its decimated fleet. Because of that, when the shipping company reported its first-quarter results last month, it centered the attention on the value of its expanding fleet instead of the fact that it continues to hemorrhage cash.

One thing the company clearly doesn't want investors to focus on is the amount of dilution it has unleashed to finance its expansion plan. That's because, with every reverse split, it gets harder for most investors to keep track, and the numbers appear to be getting better.

What goes down just seems to bubble right back up

Take the company's latest 1-for-5 reverse split, which will reduce the outstanding share count from 24 million to around 4.8 million. That split would seem to be eliminating a meaningful slug of shares, which should prop up the stock price. However, that's until we remember that the company just completed a 1-for-7 reverse split last month, which, at the time, reduced the share count from 65.6 million all the way down to 9.4 million.

For those who missed it, these numbers highlight that, from early May to mid-June, the outstanding share count spiked from a reverse-split-adjusted 9.4 million up to more than 24 million. The company more than doubled its outstanding share count in just over a month because it sold stock no matter the price, which is an increase it's now trying to cover with another reverse split.

Big ship with escorting tugs leaving port at sunset.

Image source: Getty Images.

That's just par for the course at DryShips. Before its last two stock splits, the company had engineered a cumulative 1-for-48,000 in reverse splits from the first quarter of 2016 to the end of this year's first quarter. By completing these splits, the company made its per-share numbers look more attractive to investors.

For example, at the end of last quarter, the company had $340.7 million in cash and a $286.2 million net book value of its vessels. When spread across the 67.4 million shares it had outstanding at the time, the company had $5.05 per share in cash and $4.25 per share of equity value in its vessels. 

Now, let's fast-forward to DryShip's May split, when the share count dropped to 9.6 million. After taking delivery of some previously announced vessel acquisitions, the company had $268.8 million in cash and a $356.8 million net book value of vessels, which, as a result of the split, caused the per-share amounts to rocket to $27.92 and $37.06, respectively. However, the share count has doubled since then, and those per-share numbers would have gotten cut in half if the company hadn't recently enacted another reverse split to shift the focus away from the impact of its dilution.

Of stock splits and dividends

Another way DryShips has kept the focus off its oscillating share count is by the creative way it pays dividends. Instead of paying a fixed dividend per share like most companies, DryShips said that it would pay out a flat rate of $2.5 million across its outstanding shares on the record date of the payout.

When it paid its first dividend in mid-March, the company had 143.6 million shares outstanding, resulting in each shareholder receiving $0.017 per share in dividends. What's worth noting about those numbers is that the company only had 36 million shares outstanding in early February, so investors would have been paid roughly $0.07 per share if it wasn't for all the dilution.

The company's volatile share count also impacted the second dividend. In mid-April, the company said it would pay out another $2.5 million to shareholders, with the payment expected to go out in mid-May. At the time of the announcement, the company had 47 million shares, which implied a $0.05 per-share payout.

However, with more than 65 million shares outstanding by the record date, that payout was $0.039 per share. Investors who didn't know any better might think, at first glance, that DryShips increased its dividend from the first payment. However, that's clearly not the case since the dilution offsetting reverse splits was the difference maker.

Investor takeaway

DryShips has been steadily selling stock to finance its ambitious fleet rebuild. That said, management has been trying to shift the focus away from that dilution by engineering a boatload of reverse splits and initiating a dividend. While these initiatives made the company's per-share metrics look like they are improving, the stock says otherwise, since it's down 99% this year. It will likely keep sinking as long as the company continues its practice of flooding the market with new shares to finance expansion.

Matt DiLallo has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.