TOP SHIPS Inc (NASDAQ: TOPS) released some pretty good news today. However, you wouldn’t know that by looking at the stock chart. In fact, the stock is tanking. So, what’s the deal? While the company released news with regard to the commencement of a three-year time charter agreement, it also was at the center of a filing with the SEC that screams DILUTION. Those who have worked in the market for some time know that dilution trumps all! Today, we’ll talk about:
- The time charter;
- the dilution;
- what we’re seeing from the stock; and
- what we’ll be watching for with regard to TOPS ahead.
TOPS Announces The Commencement Of A Time Charter Agreement
As mentioned above, Top Ships released some pretty good news today. In a press release issued early this morning, the company announced that it took delivery of its 50% owned 49,703 dwt newbuilding product/chemical tanker known as M/T Eco Palm Springs on May 23, 2018. The ship was constructed at the Hyundai Mipo Vinashin shipyard. The company also announced that the vessel commenced its three-year time charter employment on May 26th. The time charter agreement was signed with Clearlake Shipping Pte Ltd. Of course, the news means that the time charter will drive revenue. However, that news was overshadowed by an SEC filing warning of dilution.
In the past, we have warned investors about what we generally see out of TOPS. The stock will run for the top on good news for a short while, only to be ravaged by offerings that dilute shares and lead to massive declines. Well, that warning has come to fruition today. In an SEC filing, the company also announced that it has entered into an agreement with Maxim in order to look to the market for more funding. The equity distribution agreement allows Maxim to sell up to $14.250 million of common stock, which will be sold at a deep discount. Of course, the transaction is a source of dilution, which is not in the best interest of shareholders.
What We’re Seeing From The Stock
As investors, one of the first lessons that we learn is that the news moves the market. In the case of TOPS, while the first bit of news surrounding the commencement of the time charter agreement was positive, the news surrounding dilution trumped the positivity, leading to fears and sending the stock screaming for the bottom. Of course, our partners at Trade Ideas were the first to alert us to the declines. At the moment (11:07), TOPS is trading at $1.03 per share after a loss of $0.49 per share (32.34%) thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on TOPS. In particular, we’re interested in following the story surrounding the time charter and seeing how badly the dilutive agreement mentioned above weighs on investors. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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