What happened
Shipping company Castor Maritime (CTRM) has had an eventful, if not fruitful, past few months. The stock itself is down almost 60% since the end of April 2021, and the company had to effect a 1-for-10 reverse stock split in late May to remain compliant for listing its shares on the Nasdaq exchange. But the company completed a capital raise this week, helping shares tick back up. As of Friday morning, shares are up about 7.5% for the week.
So what
Much of the ocean shipper's fate lies with the movement of the Baltic Dry Index (BDI), which drives what prices it can charge to move cargo. That index jumped 36% in June, and though it's given back some of those gains in July, it remains near recent highs. But the reversal in the stock this week is more directly related to a debt financing deal Castor Maritime announced on Wednesday that it had completed.
Image source: Getty Images.
The company closed on a $40.75 million senior term loan facility that it said it will use to support future growth. The loan is secured by four of Castor's dry bulk vessels. Castor CEO Petros Panagiotidis said in a statement, "We are improving our capital structure and enhancing our ability to fund our growth plans."
Now what
Castor also has an ongoing share offering program to raise additional capital, but the company said it didn't sell any new shares in July 2021. Thanks to a sharp increase in the BDI during the first quarter of 2021, Castor Maritime was able to report a net profit of $1.1 million for the period ending March 31, 2021.
The index continued an overall gain from April through June, but investors won't know how that affected the company's bottom line until it reports second-quarter results about a month from now. This week, investors seem to agree with adding some debt to help finance further growth, especially with the company's leverage relatively low. But if the BDI drops back to near the level where it began the year, shareholders may not want to stick around to see how the company uses its new loan.
