Diana Containerships Inc (NASDAQ: DCIX) is having an overwhelmingly strong day in the market today. In fact, the stock was trading with more than a 100% gain early in the day. While the gains have subsided from that point to now, we are still looking at a stock that’s massively in the green. As a result, investors are starting to ask, “Is now the time to get into DCIX or should those involved run for the hills?” Today, we’ll talk about the gains we’re seeing, why this isn’t likely to last long, and what we’ll be watching for ahead.
What We’re Seeing From DCIX
As mentioned above, Diana Containerships is having an overwhelmingly strong day at the market, reaching gains of more than 100% early on in the day. While the stock has slid from the highs we saw earlier, gains are still impressive. Of course, our partners at Trade Ideas were the first to alert us to the movement. At the moment (9:57), DCIX is trading at $20.52 per share after a gain of $9.31 per share (83.05%) thus far today.
Why You Should Run For The Hills
At first glance, things are looking great on the DCIX front. After all, the stock is up by more than 80% on the day and saw early morning highs of more than 100%. While these gains may pique your interest, it’s best not to get caught in what’s likely to happen – and at any given point. So, what’s the kryptonite here? Kalani Investments!
Yes, you read that right. Kalani Investments. For those that don’t know, Kalani Investments is a company that makes its money through death-spiral financing provided to companies in the shipping sector. In general, they purchase a massive number of shares, diluting the stock in the process. From there, they dump these shares on the public when the time is right, using the companies they invest in – like Diana Containerships – as personal piggy banks, while the retail investors foot the bill. Want to see what all of this can lead to? Just do a search on Google for DRYS Kalani Investments. You’ll find everything you need to know. Is this legal? Sure it is… for the most part. Is it ethical? Absolutely not!
Now, we get into the dirt. Recently, Kalani Investments held around 136,000 warrants to purchase Series B-2 Preferred Stock. This transaction comes with a face value of $136 million. However, Preferred Stock is convertible into common stock at a strike price that is equal to 92.25% of the lowest daily VWAP during the trailing 5-day period. While the company recently went forward with reverse stock splits, these warrants are not affected thanks to the fact that they are converted into Series B-2 Preferred shares. So, with every reverse split, these shares become more valuable at the right time.
What we have now is a situation where the price of DCIX is making a run for the top. As the stock continues to run for the top, it’s creating a perfect storm for Kalani Investments to start converting warrants, and converting the Series B-2 shares into common stock from there, as mentioned above. If this happens, it opens the door to a selling spree by Kalani Investments that will likely send DCIX spiraling out of control!
The Bottom Line Here
The bottom line here is that, while the dramatic gains on DCIX at the moment are attractive, it’s likely best to stay away from the run. The reality is that the company is in bed with Kalani Investments, and as a result, Kalani has the opportunity to pull the trigger on a move that will be massively profitable for them to the detriment of retail investors like those reading this article today. My friends, I’m warning you, it’s not going to be pretty!
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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 DCIX. In particular, we’re going to be watching the price movement on the stock and moves made by Kalani Investments. Keep in mind that these moves do not need to be filed with the SEC, as Kalani is smart about keeping their total ownership at any given time under 4.99%. As a result, there’s not likely to be much of a warning when the carnage starts. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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