On Monday, dry bulk shipper DryShips
The purchase was justified as providing a strategic stake in a market experiencing strong fundamentals. Having mused at the undiminished deepwater-dance marathon, you won't find me disagreeing on that basic point. I do take issue, however, with the company's casual characterization of the deepwater market over a five- to 10-year time frame.
National Oilwell Varco
That's not to say the equity stake won't prove lucrative. I'm all for outside-the-box capital allocation, as evidenced by my recent defense of Google's
In fact, I'd argue that this foray goes directly against what DryShips investors want: a pure play on the direction of dry bulk rates. The company has made its shareholders a lot of money this year, and it's been quite easy to understand how. The Ocean Rig investment can only diminish DryShips' appeal to dry bulk devotees.
Most curious is the failure of yesterday's press release to reveal the counterparty to DryShips' share transaction. That would be Cardiff Marine, a private entity that manages DryShips' fleet and is controlled by DryShips' CEO, George Economou. Economou says DryShips is paying the same price as Cardiff, but it is most likely going to toss Cardiff a finder's fee of up to 1%.
This is exactly the sort of corporate-governance chicanery that has led your fellow Fools to vote DryShips the world's scariest stock. While I've taken a pretty conciliatory stance on the stock lately, yesterday's events demonstrate why DryShips fails to fill my sails.
- All hail dry bulk's original gangsta.
- Check out this dry bulk fire sale.
- My search for value in the sector turned up this intriguing star.