Top Ships Inc (NASDAQ: TOPS) is having yet another rough start to the trading session today, and for good reason. After exceptional gains early in the week, the company announced that it was raising funds through an SEC filing yesterday, leading to massive declines in the stock. Unfortunately, those declines continue today. Below, we’ll talk about the SEC filing, what we’re seeing from the stock as a result, and why it’s likely a good idea to steer clear of TOPS.
TOPS Announces Fund Raising Efforts
As mentioned above, yesterday, Top Ships announced that it was raising funds. In an SEC filing, the company said that it has entered into a Common Stock Purchase Agreement with Crede CG III, Ltd. Under the terms of the agreement, TOPS will be selling up to $25,000,000 in shares of its common stock at a par value of $0.01. The sale will take place over the course of 24 months, subject to certain limitations. Also, according to the agreement, the company has agreed to issue up to $500,000 in shares at a par value of $0.01 to Crede as a commitment fee.
In the SEC filing, the company also reminded investors that it has completed all sales under the previously announced agreement between TOPS and Kalani Investments; informing investors that there are no Series C Convertible Preferred Shares outstanding.
How The Stock Reacted To The News
As investors, we’ve come to expect that any time funds are raised in a dilutive way, such as what we’re seeing from Top Ships at the moment, we can expect to see declines. Well, that’s exactly what we’re seeing out of the stock at the moment. In fact, the declines started in yesterday’s session with the stock falling dramatically. However, those dramatic losses haven’t stopped. Of course, our partners at Trade Ideas were the first to alert us to the declines. At the moment (9:15), TOPS is trading at $0.82 per share after a loss of $0.08 per share or 8.88% thus far today.
Why You May Want To Stay Away From TOPS
Over the last couple of years, I’ve become immensely skeptical of Greek bulk dry shipping companies like Top Ships, Dry Ships, and Diana Containerships. Over the several years, we’ve seen nothing more than declines on these stocks as the companies continue to dilute their shares with offerings like the one that was announced yesterday.
Furthermore, all of the companies listed above have had relationships with Kalani Investments. Historically speaking, Kalani has created opportunities for the management of these companies to line their pockets at the detriment of investors through death spiral financing. This type of financing has allowed various members of management at these companies as well as Kalani Investments to use shares like personal piggy banks at the cost of investors.
While conditions are clearly starting to improve in the bulk shipping sector as a whole. Considering the recent moves made by companies within these sectors, including TOPS, I would strongly suggest at least doing your due diligence before getting involved. You may be surprised at what you find.
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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 TOPS. In particular, we’re interested in following the company to see if given the additional support in the shipping sector, fueled by higher prices, the company starts making moves that are less dilutive and more in tune with investor interests. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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