4 Reasons to Stay Away From DryShips
•Heavy debt load. As of the end of June, Dryships carried total debt and other liabilities of $5.02 billion. While the maturities of most of these debt facilities have been extended out to 2015 and beyond, the company continues to carry a heavy burden. The extent of this pressure can be seen by the fact that the company continues to raise equity and by the fact that it continues to pledge part of its ownership in ORIG to lending creditors.
•Poor management decisions. Management has often been criticized for its lack of prudence when it comes to managing risk. One noteworthy example of taking on too much risk can be seen when the company actually paid a buyer to take two unfinished ships off of its hands.
•Ongoing dilution. Management continues to brutally tap the equity markets in order to stay afloat without sacrificing additional assets. Yet such a burden has hit shareholders hard. As of December 31, 2007 there were 36.7 million shares outstanding. Prior to its latest equity raise, the company has grown this count to 403.8 million shares outstanding. On October 4, DryShips announced the launching of an ATM equity raise covering up to $200 million of common shares.
•Possible conflicts of interest. CEO George Economou has been the subject of raised concerns in the past due to possible conflicts of interest. The officer carries significant stakes in both DryShips and private company, Cardiff Marine. In 2008, the company very openly purchased and then subsequently cancelled the orders of several ships between the two companies. Yet this was not before enduring accompanying write-offs as a result.
DryShips inevitably remains one of the most perplexing companies in the present. On the one hand, the company trades significantly below its book value and has even normalized at these trading levels for multiple years. Distaste for management's decisions and the burdensome debt load have significantly harmed the company's stock. Wit