What happened
Shares of Diamond S Shipping (DSSI) stock struck a reef this morning, falling 9% through 11 a.m. EST after the oil tanker operator announced that some of its insiders are planning to unload a total of nearly 5.4 million shares on the market.
"Funds affiliated with First Reserve" are planning the largest stock sale -- 4 million shares -- with "funds affiliated with WL Ross & Co." unloading 660,870 shares as well. Plus there's an "overallotment" option being granted to the stock sale's underwriters, which could see a further 702,371 shares flood onto the market as early as Nov. 25.
Image source: Getty Images.
So what
Then-private Diamond S Shipping announced its merger with Nasdaq-listed Capital Product Partners L.P. less than a year ago, in November 2018. Although Diamond S didn't technically have an IPO, therefore, it began trading on the stock markets less than a year ago -- March 2019 to be precise.
Since then, Diamond S has reported earnings twice -- and reported losing money both times. In fact, it actually appears that Diamond S has never earned money, at least as far back as S&P Global Market Intelligence keeps records of the company's financial performance. Given this fact, and given the company's enormous debt load of nearly $900 million (Diamond S has less than $100 million cash), it's not too surprising that the company might seek to raise capital from a stock sale.
Now what
What is a bit surprising is that in this particular stock sale, Diamond S notes that all the selling will be done by investors who own shares of Diamond S, liquidating their shares. Diamond S itself is not issuing any new shares and selling them to raise cash, and therefore, "the Company will not receive any proceeds from the sale of the common shares by the selling shareholders in this offering."
With no profits, lots of debt, and now seeing the investors who know Diamond S best abandoning ship, I really can't blame other folks for selling off Diamond S stock today.
