My post that went missing yesterday noted that STNG's stock is down 12% from its TTM high while NNA's is down 32% from its TTM high. Which may be why STNG can pull off a $130MM capital raise today and why NNA probably couldn't and better not dare. There is a slight difference here in that STNG is an ECO fanboy and needs fresh equity to get these ships out of the yards as they are not available in the secondary market. NNA has, it seems, a mixed appetite and is not wedded to an ECO fleet and could employ creative financing on a distressed deal. Even with all that said, the STNG announcement reflects upon the conviction and confidence with which STNG discusses its business model and fleet development plans (ever listen to one of their CCs? Wow.). Investors know what it is and what it wants to be. In contrast, NNA can't be bothered to declare what it is. Is it a tanker company or still an open-ended, opportunistic buyer of unspecified types of vessels? AF&Co. won't tell us, thus the world doesn't know, thus NNA gets a multiple commensurate with a lack of clarity whereas STNG gets a multiple that reflects strategic clarity and confidence.
I'm still a big holder and a big fan and I've discussed this with top mgmt and I THINK they get it, but I can't be 100% sure. It is however frustrating to have an otherwise smart management team get this basic thing so wrong.
I can’t speak to the investing risk profile of any of the investment funds you mention. But, I would say that the quick-buck philosophy is certainly the dominant one on Wall Street. And the shipping sector is not one generally thought to be tailored to the conservative investor crowd. So, NNA is something of an anomaly. Those of us who have been attracted to NNA have all observed other companies with a more aggressive approach to the sector. NAT has been attracting investors with an unrealistically high dividend policy while suffering significant losses. It’s hardly uncommon to see shippers pursuing strategies that will ruin them over the medium to long term.
So, anyone with good powers of discernment should conclude that NNA is a low risk play in a sector where that is something of a rarity. (DSX and perhaps some of the drop-down subsidiaries are the only ones bearing a resemblance to NNA) NNA doesn’t pay too big of a dividend, so as to eat away at the survival prospects of the company. And by avoiding the spot market they have kept their losses small and declining. I can’t recall them engaging in follow on offerings of stock that most of us understand to be corrosive of shareholder value in an environment like today. But when the sector fully revives and the stock moves to higher levels, that will come too.
Bottom Line: NNA is built for the risk adverse crowd. It’s built to be a survivor, not to be fast out of the blocks. Sure, there is lots of talk now that a tanker revival is just over the horizon. John Fredrickson has pronounced it so. But he has the cash to weather being a bit premature. I’m not certain STNG enjoys the same situation. Little NNA can’t be so bold as John without risking it all.
The investors that are driving STNG's price are those that are focused on the possibility of short term gains. If the tanker market were to turn around tomorrow, STNG (with so many vessels in the spot market) would benefit long before NNA. That is the basis for investor enthusiasm for STNG. In their greed, these investors fail to give proper weight to their fate if economic recovery is delayed. They are currently losing about 30 cents a share annually from operations. If the recovery takes a bad turn, their losses could widen and share price plunge. There is an increased prospect for both good outcomes and band outcomes with STNG.
You commented on the evident greater availability for Sting to raise money from shareholders. But the more sober, less risky model NNA uses...with way less resort to the spot market...is precisely why NNA is likely better able to raise money with lenders.
Bottom line: If the world economy was to rocket in 2013, STNG will be sitting pretty. Revenues will soar and finance a big expansion of their fleet. NNA will be less well situated, having to give away half of their profit sharing which will hamper their ability to expand for upwards of three years.
You commented on the much better job STNG management does laying out the bull story for STNG. This is natural in that they need to draw in investors for their planned secondary offerings.. NNA's conference calls are more sober affairs. They don't offer the prospect of lolly pops for all investors, but rather a more sober approach that will tax investor patience more but inspire confidence in the banks. Their sale of fairly new ships at a loss, to buy more of the eco type ships, Is a move that seems designed to stir investors with visions of a competitive advantage. In reality, the conventional ships they sold had been discounted for the arrival of the new technology. That is how a market works. My guess is that the move will have little impact on profits, but a big one on investor psychology.
NNA's strategy is a wiser one in the uncertain economic conditions of today. STNG's strategy is a traditional strategy employed in better times with good results. But these are new seas we are in and if the world experiences stagnation or rough seas, companies employing an aggressive strategy like STNG could be swamped.
This is well-reasoned and presented but I'm not buying it. So, you are telling us that holders of STNG such as Wellington, Oceanic, Robeco, Allianz, QVT, Third Avenue, Royce, Putnam, Blackrock, Northern Trust and Morgan Stanley are all a bunch of short term-focused greedy buggers that lack the ability to parse risk/reward in a sophisticated manner, but the A. Lawrence Carroll Trust is a paragon of probity and investing wisdom. Sorry, no sale.
At about 1:30 PM the stock of STNG is at $6.48 Yet management has just announced that its new secondary offering will be at $6.10 I'm used to thinking that a secondary offering will depress a stock for some period of time. Whats up?