Genco Shipping (GNK) Stock: Here’s Why It’s Soaring

Genco Shipping (NYSE: GNK)

Genco Shipping is having an incredibly strong day in the market today, and for good reason. The company announced that it has entered into several key agreements. Today, we’ll talk about the details of the agreements, what we’re seeing from the stock, and what we can expect to see from GNK moving forward.

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GNK Announces Equity Agreements

As mentioned above, Genco Shipping is having a strong day in the market today after announcing key equity agreements. According to a press release published early this morning, the company has entered into agreements with several funds for the purchase of $125 million worth of Series A Preferred Stock.

In the release, GNK said that the 3 largest holders involved included Centerbridge Partners, L.P., Strategic Value Partners, LLC, and Apollo Global Management, LLC. Under the agreements, those involved will purchase shares at a price of $4.85 per share, which represents a premium over the previous close at $4.51 per share.

In the release, GNK said that the sale of the Series A Preferred Stock is expected to fulfill conditions under commitment letters from the company’s lenders for a new $400-million credit facility. The funds will also be used to facilitate amendments made to the company’s existing $98-million credit facility.

How The Stock Reacted To The News

One of the first things that we learn as investors is that the news moves the market. In this case, the news released with regard to Genco Shipping was overwhelmingly positive. After all, through the equity raise, the company has the funding it needs to meet obligations associated with two key credit facilities. As a result, we’re seeing strong gains in the value of the stock today. Currently (2:41), the stock is trading at $7.75 per share after a gain of $3.38 per share (77.35%) thus far today.

What We Can Expect To See Moving Forward

First and foremost, we’ve all seen these types of breakouts, and GNK isn’t going to be any different. The truth is, what happened here is that the stock was incredibly close to breaking out of a bearish triangle as is. The positive news fueled the breakout. Now, we’re seeing ridiculous gains as excited investors follow this thing up to resistance, wherever that may be. Nonetheless, when it hits resistance, it’s going to hit it hard. Chances are that, within the next trading session or two, we’re going to see a massive decline in the value of Genco Shipping.

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In the long run, this thing really could go either way. As the economy around the world continues to improve, and online shopping continues to take more and more of the market share, shipping companies are likely to benefit. However, there are still some big financial risks here. So, if you’re going to take the risk, make sure that you do your research and understand it!

What Do You Think?

Where do you think VRX is headed moving forward? Follow CNA Finance and join the discussion at StockTwits, Twitter, Facebook, and Google+!

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