DryShips Inc. (NASDAQ: DRYS) is having an incredibly strong day as the deadline for the common stock rights offering has come and gone. Of course, our partners at Trade Ideas were the first to alert us to the gains on the stock. At the moment (10:25), DRYS is trading at $3.16 per share after a gain of $0.27 per share or 9.52% thus far today.
DRYS Common Stock Rights Offering Has Expired
As mentioned above, DryShips is having a strong day in the market as investors start to see that the common stock rights offering has expired. This offering was an add on to the private placement of common stock with various entities that are controlled by George Economou. This common stock rights offering expired on October 2nd. While there has been no release by the company with regard to the experation, we haven’t seen any extension or cancellation announcement. So, it only makes sense that the expiration has come as expected.
George Economou’s Interests Are Aligned With Shareholders… For Now
I’ve been following DRYS for some time now, and I believe I’ve made it clear that investors should be wary of the CEO, George Economou. Since I have been following the company, I’ve only seen moves that have made it clear that Economou’s ultimate goal is to line his pockets, even if his moves come at the detriment of the investors that keep DRYS in business.
Nonetheless, thanks to a recent Backstop Agreement, Economou’s interests are somewhat aligned with investor interests at the moment. Under the agreement, Economou had the right to purchase up to $100 million in shares through the now expired rights offering. As a payment for the amounts due under the agreement, George Economou would cancel an equivalent amount of principal due under the Sierra Credit Facility.
While there is no telling whether or not Economou did purchase all of the $100 million in DRYS shares, if he did, $73 million would be outstanding under the Sierra Credit Facility. Another thing worth mentioning is that due to the Backstop agreement, the shares purchased by Economou would be locked for six months, helping to align his interests with shareholders.
Don’t Let The Backstop Agreement Fool You!
While Economou is being forced by the Backstop Agreement to hold shares and align his interests with investors at the moment, this isn’t likely to last long. Remember, the agreement only requires that he hold the shares for a period of 6 months. After this 6 month period, it’s likely that Economou will go back to playing the same old game. Of course, that game can no longer be played with Kalani Investments on his team, but that doesn’t mean much. After all, Economou has shown just how resourceful he is when it comes to his efforts to line his pockets at the detriment of DRYS shareholder. So, while the Backstop Agreement is great for now, investors simply shouldn’t trust that Economou has their best interest at heart. As such, they should be keeping a close eye on the company’s management for clues as to what management will do to slap them in the face in the future. Nonetheless, at the moment, all things seem cordial!
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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 DRYS. In particular, we’re interested in following the story surrounding the Backstop Agreement. We’re also interested in following Economou to see what the next move he makes at the detriment of investors will be. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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