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.


Blake Bos has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.