What happened 

Shares of oil tanker owner Nordic American Tankers Limited (NYSE:NAT) fell 39.3% in December, driven by a drop in shares when a new recapitalization plan was announced. A dilutive event sprung on shareholders in December was what sent a shock through shares mid-month, but long term there could be an even bigger reason to be concerned with the company.

So what

A $110 million equity offering was announced on Dec. 12, which is when shares took their biggest step lower. But it wasn't the only piece of a recapitalization of Nordic American Tankers.

Tanker sailing away from an oil rig.

Image source: Getty Images.

On Dec. 1, a sale/lease-back agreement worth $130 million was announced for three newbuilds due in 2018. A $375 million back-stop financing facility was announced along with plans to raise a $250 million credit facility. To retire an existing credit facility, another $100 million to $150 million bond or asset sale has also been considered.

Now what

Given Nordic American Tankers' $367 million market cap, these financing moves are both incredibly dilutive as well as risky for the company. More debt to fund newbuilds and keep the existing fleet afloat could work if tanker demand rises in the future, but if it doesn't we could be witnessing the leverage that ends up limiting the company's financing options long term. I don't have a lot of confidence that oil shipping with be a booming business over the next decade and that's why I think December's drop is just the beginning of the bad news for Nordic American Tankers.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.