A strong rally in the dry bulk shipping sector over the past several months has led many investors to companies like Dry Ships (NASDAQ:DRYS). But before you hop on board, don't ignore one very big warning sign. Several related-party transactions are funneling millions of shareholder dollars into businesses privately owned by Dry Ships' CEO.
In 2012 alone, Dry Ships expensed $38.08 million from the company's coffers into several companies owned by the CEO. This included $6.2 million paid to the CEO in the form of stock-based compensation. These are just two of many worrying signs behind the related-party transactions taking place at Dry Ships recently.
In the video below, Motley Fool analyst Blake Bos explains exactly what a related-party transaction is, what kinds of transactions are taking place at Dry Ships, and whether investors should care about them.