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Someone would still need to sell them for $2.50 - I would wonder who are the preferred holders right now.
We know that the CEO already holds 208,000 shares of TEUCF. That represents almost 23% of the outstanding shares. There are only 916K outstanding. What would prevent the CEO or one of his affiliate companies (Neige, Paragon, AllSeas...etc) to buy more TEUCF shares on the grey market for $2.50. TA said himself that the "Grey Sheets' are completely unregulated. He would then reap a 100% dividend annually and get back 10 times his money when the shares are called. Not a bad deal.
My original question was if he an insider can get away with buying or selling preferred shares on the grey sheets without having to file an SEC form?
They would have to hold out a repurchase plan, or offer a conversion to common, which a few holders did. Not sure how well they made out. Probably not too good.
They are borrowing money from toxic lenders just to keep the doors open. They would have to pay face value to buy the preferred shares back. They cannot buy them on the open market.
It was delisted from the NYSE the same time the commons were. Because it is debt there might not be a place for it on the OTC.
Does anybody know if Box Ship is allowed to purchase back their own preferred shares on the open market without SEC filing?
I am trying to find a logical reason as to why Box Ship's management decided to move the preferred shares (TEUCF)to the OTC Pink Sheets (Grey Market) and not on the much more liquid and regular OTC where the common is trading?
1) It is an unregulated market with no rules.
2) Market Makers can do whatever they want
3) There are no visible BID and ASK prices
4) Last trade prices are often not reported thus making price quotes completely unreliable
5) Front running is common due to the manual nature of the market.
6) It is extremely difficult if not impossible to buy and sell.
7) Most self-directed corporate 401K accounts restrict investors from purchasing stocks from the grey market OTC
I have a hunch that Box Ship may derive a benefit from doing this. What if their strategy is to buy back their own outstanding preferred shares for pennies on the dollar thus ridding themselves of a huge financial future obligation.
If you have 1 Million of outstanding preferred shares with an obligation of $25 Million dollars plus annual accruing dividend of $2.5 Million, wouldn't it be in the best interest of the company to buy back as many shares as they can?
Any ideas?
Thanks for the update - they were still listed in late August when I last checked. That was after the reported sale dates, which led me to question whether the sale took place or was backed out. So they are indeed out of service.
I did not know that. Interesting. Thanks for sharing. BTW, I went to the tracking site you recommended and they also list both the Box China and Box Hong Kong listed as decommissioned.
The index is a little misleading - the rates for 6500 TEU capacity ships have been on the rise since Jan 1, for example. Rates are also determined by a number of factors, such as in the transport of hazardous cargo. Box does transport hazardous cargo, which may be more expensive to transport. You need an account on marinetraffic.com to track all fleet activity. A free account will only give you 3 days history.
Where did you get the info that the two sold ships are still sailing. Box Ship's web page only lists 7 ships in their fleet.
FYI, below is a link that I use to monitor container ship rates. This is the Harper Peterson Index which I have found reliable over the years. The index is updated once a week. According to their info, container ship rates are still on the decline. Take a look:
http://www.harperpetersen.com/harpex/harpexRH.do?timePeriod=Years2&&dataType=Harpex&floatLeft=None&floatRight=None
Yes rates do have to improve, and they have been, but must continue to do so. Rates for Box China and Box Hong Kong were not necessarily obtained until they were sold. What strikes me as being strange is they continued to sail under Box Ships, Inc. after they were sold. Was the deal backed out (did they have that option), or was this an error that was carried by the tracking system. What is also important is the ships do not sit idle. The market is forward looking as well, with ships value being reflective of future prospects and anticipated revenues. Guidance in upcoming report is crucial. What is a little concerning is the upcoming report may not truly reflect the current situation.
I don't quit agree with the calculations posted on the TEUFF board. Remember that in 2015 and 1st quarter of 2016 Box Ship still had a contract for the Maule at $38,000 per day. That contract expired in March of 2016 and now the ship at current rates may be bringing in $6,500 a day. The market value of these ships depends very much on the going rate. They also had the two older ships contracted for around 19K per day which are now sold. I think the Net Assset Valuation (Mark to Market) is not much above break-even at these rates. Once the rates recover and go back to where they used to be, then a valuation of $0.70 is low.
The main reason I say commons have more upside (provided the company recovers) is the most preferreds can get is $2500 plus accrued dividends - add $250 per year for those, or about 8x current market. NAV (net asset value) is about 70 cents a share, after full payout of preferreds, with 100 million O/S. See the bottom of the I-box of TEUFF board for that calculation. True the NAV might take a hit with the next financials, but even with a $20 million hit, should be 50 cents a share for commons, or 20x current market. The preferreds right now are priced for outright failure of the company, which I don't think is appropriate.
I agree with your assessment to some extend. The common share price as off today values Box Ships at around 2.3 Million which I think is too low. I do agree that the main reason for this to not trade higher is the hidden fear of outstanding toxic shares and the possibility of more toxic notes in the future. The good news is that no matter how many toxic notes they issue, it will not negatively impact the preferred. It may even help the preferred because it improves the cash position while diluting the common.
I personally think the preferred is the better bet because the upside is 6-1/2 times today's value of $4 plus a nice 50% annual perpetual dividend that accumulates even though it is not paid right now. If you believe that the company still has 2.3 Million in actual value, the preferred should be trading at $25. I am not so sure that the the common shares have more upside. I have a hard time justifying a valuation of 13 Million (6-1/2 times 2.3 Million). My estimate for Box Ships 2016 revenue is 21 Million with a 5 Million EBIDTA loss. For 2017 I can only come up with 15 Million in revenue if rates stay where they are at now. The real recovery I don't expect until 2018.
The only reason the preferred is trading at $4 is because of the Grey Market environment that allowed very few low volume transaction of panic sellers drive the price so low. The difference between the BID and ASK is so huge that a 100 share transaction can cause multi dollar price swings. Unfortunately there are not many sellers left. If have tried buying this as high as $10 and couldn't clear.
The only risk for the preferred is bankruptcy and liquidation and even then I believe that you are better off with the preferred. Just my humble opinion.
My take on that is the delisting from the NYSE forced a lot of strong hands out of the market, with the OTC not capable of fully sustaining an appropriate market cap. At the same time, the conversions of preferreds to commons, and the additional pressure caused by the (two) convertible notes, served to compound the extremely oversold condition in the commons. Agreed the company may need another 2-3 quarters to prove itself.
I believe that the preferred shares have lower priority than bank debt but higher priority then the common shares.
The company should be able to survive the next two years at these low rates but ultimately shipping rates need to get back to at least 10K per day per ship for the company to return to health. Right now rates are around 6K.
What I can't understand is that other Greek container shipping companies of similar size with similar fleets and financials are still trading at much higher valuations and their preferred share are trading close to par. These companies are facing the same head winds but for some reason the market values them much higher. Examples are the common and preferred shares of Diana Containership. (DCIX and DSX-B). Market Value around 34 Million and preferred trading at $15.
Agreed with your additions - one other thing I should add is it might not be clear as to the placement of preferred shares with regards to bank debt in liquidation preference, or in the sale of the company.
Good summary, MB! A couple of additions to your post. There are approximately 916K outstanding shares of TEUCF. As you said they pay dividend of 9% if you buy the share at $25. If you manage to get in at around 4, the annual dividend is over 50%. The last dividend they paid was in January of 2016. Even though the board suspended the dividend, it is still accumulating at a rate of $2.25 per share for each year. Like you said, if the company should liquidate, they have to pay out all 916,000 preferred shares at $25 plus the accumulated missed dividends.
I believe that the CEO owns a large portion of the outstanding shares and has a vested interest in getting paid himself.
This is not a stock to trade. This is only a buy and hold opportunity betting on the survival of the company. My time horizon is 2 to 3 years. Once you are in, it is hard to get out. When Box Ship was delisted, the common went to the regular OTC Market which is much easier to trade. Because TEUCF had less than 1 Million outstanding shares, the symbol was delisted to the OTC Grey Market which makes it very hard to trade.
Box Ship will have to face lots of head winds in the next 2 years but with the sale of the 2 ships they have enough cash to survive. I also think that once they reinstate the dividend and move the stock to a better trading environment, this will jump back to the par value of $25 per share.
PK - I am leaving now and will be out of town until the 15th - short answers - These trade on the Greys and best to call your broker, who will call the floor to see where orders are and how much so you can do a matching trade. Not very liquid, you will very likely have trouble selling when you want. Safer - if company fails these get paid first. Commons have higher upside. These will trade at a maximum of $2500 but no higher. These have been around since I think 2010 (will have to research) - these got delisted at the same time when the commons were. They were trading around $2500 back then. A good bet on the company's survival. They pay 9% interest, but dividends have been suspended. Again these are NOT very liquid, and very hard, but not impossible, to trade.
last question how long have these been trading?
The commons are already trading PM 2.2 Million but the pps is not moving.
Are they safer than the commons?
First post - this is the board for discussion of TEUCF, the Box Ships, Inc. 9.00% Series C Cumulative Redeemable Perpetual Preferred Shares. Dividends have been suspended.
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