Why Empire Resorts, SunEdison, and Diana Shipping Slumped Today

These stocks fell even as the overall market performed well.

Dan Caplinger
Dan Caplinger
Dec 29, 2015 at 6:35PM
Investment Planning

Image: Diana Shipping.

Tuesday was a strong day for the broader stock market, with major market benchmarks returning to positive territory for the year on strength from some of the best-performing stocks of the year. The emphasis on positive momentum from key sectors like technology and energy helped push the Dow and S&P 500 up by more than 1%, but several stocks didn't participate in the intra-holiday week rally. Empire Resorts (NASDAQ:NYNY), SunEdison (OTC:SUNEQ), and Diana Shipping (NYSE:DSX) were among the relatively few losers in Tuesday's market action.

Empire Resorts fell 13% after the company behind the Monticello Casino and Raceway in New York said that it would make a rights offering to its common and preferred shareholders. Under the offering, shareholders as of January 4 will receive rights to purchase new common and preferred shares, with Empire Resorts intending to use the proceeds from the eventual sale of shares toward expenses related to the development of the newly approved Montreign Resort Casino as well as for other working-capital purposes. The share-price decline comes as investors anticipate that the pricing for the rights offering could result in dilution for existing shareholders, especially given that Empire Resorts stock has already lost half its value just since the beginning of 2015.

SunEdison dropped 9%, falling for the second consecutive day as investors deal with reduced guidance from the company on anticipated installations for the fourth quarter and concerns about an apparent attempt to negotiate a substantial credit line. The potential problem for SunEdison shareholders is that if a financing deal includes an equity position for lenders, then current investors could find their stake in the solar specialist sharply diluted as a result of the deal. With hedge-fund activist investor David Tepper looking for more information from SunEdison about acquisitions and general corporate strategy, SunEdison has a host of issues to get through in what has already become a tough environment for solar companies generally.

Finally, Diana Shipping declined 7% on a tough day for shipping companies generally. So far this month, Diana has announced a number of time-charter contracts with customers, including a deal with Cargill for a Kamsarmax dry-bulk vessel at $6,000 per day for between 10 and 13 months. Similar agreements for various classes of ships have ranged from $4,900 to $7,750 per day, and Diana has also been able to defer the delivery dates for two newly built vessels by about five months. Despite finding demand for its ships, Diana still has to deal with the impact of a sluggish global economy that has had an impact on shipping volumes, and with the stock poised to post a second straight year of dramatic losses, Diana shareholders appear ready to throw in the towel on the shipping company's future prospects for recovery.