Top Ships Inc (NASDAQ: TOPS) is having an overwhelmingly strong day in the market today, with the stock jumping toward the top. The reason for the gains seems to be a short squeeze as excitement surrounding the shipping sector causes shorts to bail out of their positions. However, the big question is whether or not more gains are coming. Today, we’ll talk about what we’re seeing from TOPS, what a short squeeze is, what we’ve seen from the company as of late, and what we’ll be watching for ahead.
What We’re Seeing From TOPS
As mentioned above, Top Ships is having an incredibly strong time in the pre-market hours this morning as a short squeeze takes hold of the stock. Of course, our partners at Trade Ideas were the first to alert us to the gains. At the moment (9:04), TOPS is trading at $1.03 per share after a gain of $0.31 per share (43.06%) thus far today.
What Is A Short Squeeze?
The reality is that the gains that we’re seeing out of TOPS today are the result of a short squeeze, but what is a short squeeze? Well, when shares are sold short, it means that those holding those positions are essentially making a bet that the price of these shares will fall. However, when the value of the stock rises, even slightly, it can make short sellers nervous because their losses climb as the stock rises. As a result, when we start to see small gains on stocks that are sold short heavily (like Top Ships) shorts get nervous and start to abandon their positions, taking the loss and stopping the bleeding. Essentially, the shorts have been squeezed out of their positions, causing the value of the stock to fly. That’s exactly what we’re seeing this morning.
What We’ve Seen From The Company Recently
Recently, there has been quite a bit of news out of TOPS. First and foremost, in August, the company announced that it had regained compliance with the NASDAQ’s minimum bid requirement after moving forward with a 30-for-1 reverse split. Of course, this excited investors, causing the value of the stock to fly.
In September, another big announcement came. TOPS announced that upon the delivery from Hyundai in the third quarter of 2018, M/T Eco Palm Desert will enter into tie charter employment with Central Ship Chartering Inc. This employment will last for a period of 3 years. Under the terms of the agreement, the charter has the ability to extend the firm employment period by 2 years if they so choose to. As a result, the potential gross revenue backlog from this time charter could be as high as 27.5 million including optional periods. During the same time, the company announced to investors that it has entered into a $23 million bank loan facility with a European bank for the financing of Eco Palm Desert. Ultimately, the total gross revenue backlog for the fixed charter period of all of TOPS’ operating fleet is rising. In a recent statement, Evangelos Pistolis, President and CEO at the company, had the following to offer:
“The total gross revenue backlog for the fixed charter period of all of the Company’s operating fleet stands at about $106 million and when adding the 50% of our joint venture vessels it increases to about $122 million, with cashflow visibility reaching into 2021. Our business strategy continues to be focused on further expanding our fleet as it is important that we achieve a certain critical mass in
terms of fleet size with an aim to maximize our operational efficiencies and synergies.”
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What We’ll Be Watching For Ahead
At the moment, it seems as thought TOPS is well on the road to recovery. With the short squeeze pushing the stock toward the top, those who have held the stock are definitely grinning from ear to ear. However, be careful here. The shipping sector is a highly volatile one, and even in times of rapid growth, we could see massive single-session declines. Nonetheless, with the expansion of the company’s fleet, improvement of financial conditions, and strong focus of management to effect growth, this stock could definitely be on the mend. We’ll continue to follow the story closely and bring the news to you as it breaks!
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