Yet one more blow to the fast sinking credibility of the Navios mgmt team brings the entire complex down with it. I have highlighted to mgmt the dangers of all the cross-holdings and the common name - only those paying alot of attention understand the differences of what each co does and the different market environment they operate in...and, people probably figure if NMM and NM stink, why would NNA be any better with the same mgmt team??? - but they don't care. It's one big shipping empire to them and the stock market hates, hates, hates that attitude. So, yes, NNA is dirt cheap, but it risks staying that way unless something is done to clear up the obvious governance/structural/managerial warts.
Vessel mgmt is a way that these guys get money moving between entities semi-legitimately. It's just like a company renting office space in the building that the Chairman owns (they do that too I think). Of course this all CAN be done at arms length...but the market doesn't believe that these Greeks do arms length. Thus the horrid way all Navios shares trade. Cross holdings mean risk of cross-subsidies and the market hates it.
My news says that JPM maintained overweight on NNA. It doesn't matter, the market believes that NNA will cross-subsidize the dying NM rather than optimize for itself. Call it rampant bias and unfair but the market is reality, all else is wishful thinking. Don't laugh but many many people will see "Navios downgraded" headlines and assume it is NNA because all but the most involved don't know the difference between the 4 Navios-named entities. A slightly smarter way to go is to have all of your connected entities named and symboled totally differently...oh say like FRO, SFL, GOGL, SDRL....hmmmmm
I did the same thing 3 years ago, thinking that a pure play clean tanker co doing $200mm EBITDA as the cycle turned positive would fly. Little did I know that that pure play would go off and launch a daughter MLP, do joint ventures in other sectors, and generally hold itself out there as open-ended strategically. And all along I kept saying to myself "Man, this thing is cheap!"
I think this is right, but this is an anomaly created by the turmoil in shipping stocks recently. THe standard MLP playbook is issue dilutive equity at a hunky discount, buy assets, rinse, wash, repeat - and Navios is no different. In more normal times, if the money was there they'd take it in a heartbeat.
I agree we are backed into a corner now and have very few good options. But let me first note that I told Ted and Leo that NAP was a terrible idea. I told them 3 years ago to rename NNA and not muddy the waters with more cross holdings.
Yes, buy back shares (preferably from NM to devolve the linkage, but I doubt NM is a seller). I would spin out the NAP shares, get them out of there, let investors figure out if they want to hold. If you want to sell VLCCs, sell them to 3rd parties. Copy the dividend policy announced by peers...XX% of adjusted net income will be paid out, rest for delevering and fleet renewal. Change name and revamp Board to signal a move away from the Navios conglomerate.
clrod - You are not stupid, just an irrepressible Munger-esque value investor chewing on this nasty cigar butt. But all the cigar-butt chasing value investors in the world ain't gonna save any Navios entity from a lack of credibility. NNA will remain cheap right up into the next cycle at which point it'll be cheap with bad fundamentals as opposed to cheap with good fundamentals. AF has to take drastic action to pull this thing out of the nosedive, but she most likely won't.
Yes, there is a level a financial engineering that could fix the mess, but the bigger issue is that AF's credibility is shot. Who is going to invest in a Navios vehicle ever again under current circumstances? The whole kit and kaboodle should be handed over to a management team that investors can believe in. Do you think for a minute that if Fredriksen owned these assets, they wouldn't get a mark up overnight?
It is safe to say that AF&Co.'s empire lies in tatters. Nolan has called bust on NM. NMM is in the two cruddiest sectors in shipping and even the healthy siblings are getting taken out back and shot by the market. At the risk of sounding like a broken record...the structure of the Navios group is STUPID, STUPID, STUPID. The interconnectedness is poison. It keeps away solid, professional, institutional investors and exposes each entity to the risks of the other. One gets a flu and they all catch cold. How much money and credibility does Angeliki have to lose before she changes course??
Curious what you think Trub...in light of Nolan's sell call on NM suggesting it goes bust...does Angeliki pull something akin to what Fredriksen did with FRO, keeping it on life support until better days??
Trub - Really? Are you baiting me again? I will say it again...total lack of institutional coherence (layers of corporate ownership/crossholdings, amorphous/fickle strategic direction, related party risk). In short, a piece of an empire rather than an institutionally-appealing equity investment.
NNA should be buying NM. Backdoor way to buy back own shares and get optionality on all the other goodies in AF's cornucopia of shipping yummies. And since we are an free-wheeling "acquisition company and certainly NOT a dedicated maritime energy transport company, just say "Yes, we can!"
Given the inter-connectedness, that is exactly right. Shouldn't have to be though if wasn't one big spaghetti mess of an empire.
That is your retort? Give me an actual argument.
You don't see an implicit subsidy from NNA/NAP to NM? The market does, healthy co down, stressed company up. Who do you talk to that tells you otherwise? Any professional small cap PMs in that mix?
Yes, and the word on the street (from institutional investors that know this space well) is that NNA and NAP are clearly the sugar daddies that will keep NM afloat, which is why nobody wants a piece of them. Investors actually want discrete entities that exist for the benefit of shareholders of those discrete entities. All these crossholdings is hurting NNA and NAP, but Greeks will be Greeks. If the tanker market goes south and dry bulks stays where it is...it is all over for AF.
I am a long-standing fan of AF&Co. but I am growing skeptical by the day. Their flagship co is selling for liquidation value, their original MLP strategy lies in tatters, their second MLP remains somewhat viable only by virtue of booming tanker markets, and their healthiest entity is roundly disregarded by investors. Those are the facts on the ground and AF shows no contrition or interest in changing course. She must be very bullish on a quick turnaround in dry bulk...the only thing right now which can help her out. At the very least we can all console ourselves in the fact that she has lost a tremendous amount of money right along side us all.
I don't plan to bc I don't own enough to do so. But someone who did, like a Carl Icahn, probably couldn't either. THat was my point, these companies are fiefdoms and you have to trust that they are somewhat shareholder-friendly fiefdoms or you are along for an interesting ride. The history of publicly-traded, Greek-owned, shipping cos. is that they are happy to have public shareholders if they can get super-rich via the public markets, but shareholders are enormously pesky and inconvenient when times are tough. The NM has and, I hope, will continue to hold themselves out as a counter-example to that, but you never know.
The Board CAN fire the CEO of any public company, so long as the CEO is not also Chairman, a large shareholder, fuly-entrenched via cozy Board composition. I know because I've done it.
You know what each of those names have in common? You can't fire the CEO. When it didn't work out at TNK, Bruce Chan got the boot, for example. You can't fire Angeliki or Nick Tsakos. With that handicap in place, companies need to be unambiguously, unfailingly, and unstintingly pro-shareholder and managed to the highest institutional quality standards. Short of that...discount.
That means hyper-clear strategy, not even the specter of related party shenanigans, no unpredictable strategic wingdings, constant striving and communication how delivering value for shareholders...you've heard it all before, I'm afraid