Shipping stocks in rough seas

Last year was probably the most successful for shipping companies, as 11 firms – six of them Greek – got listed in the New York Stock Exchange. But it was also the year investors departed from the sector after the positive reception of the first months following the 2004 euphoria when three shipping companies entered the NYSE. That became more obvious by the latter half of 2005, when a series of scheduled public offerings of shipping companies were either canceled or postponed indefinitely, and even those that did go ahead failed to be covered. Examples included Golden Energy, of the Restis group, and Capital, of the Marinakis family. Still, shipowners managed to draw funds totaling $2.6 billion from the US market, which became a key instrument for their funding. Today in the NYSE there are a total of 11 Greek-interest shipping companies. They are Tsakos Energy Navigation (TEN), Excel Maritime, Navios Maritime, Top Tankers, Genmar, Genco, Stealth Gas, Freeseas, Quintana Maritime, Dryships and Diana Shipping. Despite the rather uneasy end of 2005, there still is great interest in entering more shipping firms this year. Euroseas, of the Pittas family, was recently approved for listing its stock in the New York market, absorbing the already listed company Cove Apparel. This is a quicker and less costly listing method, as it circumvents the procedure of public offering. This way is also considered ideal for small and medium-sized shipping companies. Similar was the method used by FreeSeas of the Gourdomichalis brothers and Ionas Varouxakis, which bought out the listed Trinity Partners Acquisition, a special-purpose acquisition firm that had entered the stock market without an object. It was another vehicle company created to facilitate firms with an object to enter the market without high costs. Freeseas eventually listed its stock in the US market on December 16. «The drop in freight rates creates openings for companies that have entered the American stock market, particularly for those with a certain cash flow as they can make low-cost investments and use the many financial tools offered,» Varouxakis told Kathimerini recently. «For instance, the decline in rates has resulted in the drop of used ships’ prices, favoring those who will buy ships during this period.» The most successful listing in 2005, in terms of oversubscribing, was in the beginning of the year, concerning Dryships of the Economou family. The company had a target of $127.8 million, but in the end its oversubscribing fetched $206 million. Timing played a key role in that case as Dryships was the first shipping company to enter the market in 2005, in early February. Investors were then looking for shipping companies in the dry cargo sector, where Dryships is active, in view of the high return of profits in the market during 2004 and the rising demand for raw materials and goods, mainly thanks to China. Furthermore, at the time there had only been one company available to investors, and that was Excel Maritime, another Greek firm. Following suit was Diana Shipping of Symeon Palios. The dry cargo ship company was listed on March 23 and drew $241 million. Palios told Kathimerini that «entering the stock market gives the firm the ability to utilize various financial options. However we need a great deal of wisdom and business skill to realize our strategy, which entails the constant development of our company.» Just a few months after its public offering Diana drew another $67.5 million by successfully increasing its share capital. Dry bulkers By the end of 2005 the dry bulk shipping sector had taken the lion’s share with the listing of Quintana Maritime (drawing $192 million from the public offering’s $267 million) and Genco, a company belonging to Petros Georgiopoulos, the owner of Genmar, that is also listed (Genco drew $237 million from the $283 million of its public offering). On October 6, Haris Vafias’s Stealth Gas, a company specializing in Liquefied Petroleum Gas ships, also got listed and drew $115 million against expectations of $123.2 million. Gavriil Petridis’s Aries Maritime – who also controls Magnus Carriers – was the only Greek company in the tanker and containership sector that got listed. In early June Aries was the first victim of investor suspicions against shipping firms, as the market started deflating from then on. The company’s double activity had likely confused the investing public, yet eventually Aries emerged the sole winner from the new Greek-interest entries last year, reaping profits of 9.33 percent to date. The drop in rates has greatly affected investors’ attitudes, particularly in the dry bulk market that last year declined by about 50 percent. This led many analysts in early December to downgrade dry bulk companies, proposing lower stock prices for every firm. Few of them pointed out, though, that a dry bulk ship covers its operating expenses even with a daily rate of $7,000, when market prices today are more than double. Stamatis Molaris, the president of Quintana Maritime, recently defended dry bulk firm stocks, noting they ought to be considered attractive for the public. The sector has not seen the concentration trends recorded in the tanker sector and concentration is bound to happen, based on listed companies, he said. With Aries Maritime excepted, the new entries in 2005 had only losses to show. The worst ones concern Dryships, whose share fell by 44.85 percent. It is followed by Diana Shipping (-33.35 percent) and Genco (-22.52 percent). On the contrary firms with some years behind them in the capital market provide better value: Excel Maritime that was listed in 1997 without a public offering has recorded profits of 176.7 percent to date, followed by TEN with 139.67 percent.