DryShips Inc. (NASDAQ: DRYS) has been an incredibly interesting stock to watch over the past year. As the CEO of the company, George Economou has used the company as his personal piggy bank; he has made several moves that have been detrimental to shareholders. However, with a recent investment of $100 million of his own money in the company, Economou now has a vested interest in seeing the company succeed, at least for now. So, is now the time to start getting involved in the stock? We’ll get into that in a minute, but before we do, we’d like give a quick thank you to our partners at Trade Ideas for being the first to alert us to today’s gains. At the moment (11:13), DRYS is trading at $4.32 per share after a gain of $0.71 per share (19.62%) thus far today.
Economou’s Interests Are Aligned With DRYS Investors’… For Now!
One of the big keys in determining whether or not DryShips is a strong investment decision at the moment is to look at the CEO of the company, George Economou. As mentioned above, in the past, Economou has used DRYS as a personal piggy bank; not only lining his pockets, but helping to keep companies in which he had a vested interest afloat. During this period of time, I warned investors to stay away, and for good reason. The stock fell dramatically as Economou damned the company.
However, recently, things have changed and in a big way. You see, several weeks ago, George Economou invested a massive amount of his own capital into DRYS – $100 million to be exact. This happened through a rights offering that closed a couple of weeks ago. As a result of this investment, Economou now owns 69.5% of DryShips shares. Not to mention, an entity that is controlled by Economou is also the holder of just about all of the company’s debt, around $73 million.
To make things better, Economou, a man that has built a evil name among shareholders as a person who sells assets at the cost of unsuspecting investors, simply can’t do what he’s known for. When investing the aforementioned $100 million in the company, Economou agreed to a 6-month lock up period. As a result, he can’t sell his shares in the company until April 2018. So, at this point, it is in his best interest to make moves that would increase the value of shares and align his own interests with shareholder interests.
On that note, I am not yet willing to say that investors should buy DRYS and hold it for the long run. However, it would likely be a strong move to buy it now, and hold it until April of 2018, when Economou has free reign to go back to what he does best, cashing in at the expense of investors.
Another Reason That Now Is The Perfect Time To Get Involved
Considering Economou’s record, if he wasn’t aligned with investors, this wouldn’t matter. However, since his interests are currently in line with investor interests, there’s yet another reason that now may be the perfect time to get involved in DRYS. That’s because the price of bulk shipping is starting to climb, and DryShips is perfectly aligned to take advantage of this.
You see, DRYS has a dry bulk fleet that’s overwhelmingly attractive at the moment, as almost all of it is trading on the spot market. Various bulkers, including 12 Panamax, 5 Kamsarmax, and 4 Newcastlemax, are all trading on the spot market and taking advantage of rising rates. To put these rates into perspective, Capesize rates a year ago were at about $10,000 per day. Today, Capesize rates run at about $22,000 per day – a more than 100% increase. This, in combination with the fact that DRYS is currently working to expand its fleet, and with the fact that Economou’s best interest is to keep the stock moving upward, makes the stock overwhelmingly attractive at the moment.
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The Bottom Line
The bottom line here is that, while DRYS wasn’t always a good investment, it’s overwhelmingly attractive at the moment, although the idea of the stock being a strong investment won’t last long. At the end of the day, the keys to the ship lie with George Economou. As long as his interests stay aligned with investors, chances are that the stock will continue to find its way upward. However, don’t get into the mindset of “hold it forever.” Come April and beyond, Economou is likely to go back to his standard operating procedure of cashing in at the expense of shareholders.
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