DryShips (DRYS) Stock: Don’t Bite Into This Forbidden Fruit

DryShips Inc (NASDAQ: DRYS) is having a relatively strong day in the market today. However, there’s no good news on the stock to speak of. In fact, the most recent news is that the company’s CEO, Chairman George Economou, has been named a defendant in a lawsuit. Nonetheless, traders are trading, sending the value of the stock toward the top. However, think twice before biting into this forbidden fruit. Since history repeats itself, it’s easy to come to the conclusion that this run toward the top isn’t going to last long. At the moment (11:24), DRYS is trading at $1.17 per share after a gain of $0.14 per share or 13.59% thus far today.

DRYS CEO Named AS Defendant

As mentioned above, while there hasn’t been much good news surrounding DryShips, there has definitely been news. In fact, less than 24 hours ago, Benzinga reported that George Economou, CEO and Chairman of the company, has been named as a defendant in a lawsuit that was filed in the High Court of the Republic of the Marshall Islands. The suit alleges breaches of fiduciary duty, unjust enrichment, and conflict of interest. The plaintiff is hoping to obtain a temporary restraining order and preliminary injunction to suspend any further issuance of new common shares by the company at a price per share below the price specified by the plaintiff in the complaint. The plaintiff is also looking for certain other compensatory and punitive damages.

At this point DRYS has taken the time to review the complaint. However, the company says that the complaint is without merit and intends to fight the case.

There’s A Simple Message I Have Here

The simple message is that DRYS is the forbidden fruit of the market at the moment. The reality is that every once in a while, traders send the value of the company flying, but that never lasts long. The truth of the matter is that while traders love to push this thing around, smart investors are staying very, very clear of the stock. There are a few reasons for this:

  • Reverse Split Much? – Reverse splits are not generally a good thing. While the change is only cosmetic, it generally shows that a company is struggling to hold its valuation. Well, the term reverse split seems to be a favorite among those at DRYS.
  • Financing – When it comes to DryShips, it seems as though the company is designed to earn its corporate heads money, even at the investors’ cost. With consistent waves of dillutive financing, value is consistently being taken away from investors.
  • George Economou – Finally, George Economou is an issue in and of himself. Over the past year, he has led the company through a series of losses, taken the liberty to pay himself an exorbitant salary, and offers no form of hope for investors that he will soon lead the company in the right direction.

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What We’ll Be Watching For Ahead

Moving forward, the CNA Finance team will continue to watch DRYS closely. In particular, we’re watching for the next reverse split, investment made by Kalani, or really, any more moves the company makes that seem to be deliberately for the purpose of taking value from shareholders and putting it into the pockets of the company’s leadership. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!

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