The Golden Fleece?
Dryships’ Debut Shows Speculation, Liquidity Trumping Experience
“It was surreal. When someone asked why he
was doing the deal, here–now, he actually said,
basically, ‘Because Americans are the dumbest
investors around, and there’s lots of liquidity in
this market.’”
The man sputtering on the other end of my
phone line several weeks back is no innocent
abroad in the wilds of
Wall Street. Not with
more than 40 year’s
experience in buying
and selling institutional
securities under his
belt. And not with the
sort of rare and enviable
track record he
has to his credit, one
based on consistently
preserving, as well as
increasing, other people’s
capital. Turns out
that this consummate
pro had just gotten
back from a “roadshow” lunch for a Cantor
Fitzgerald deal. A luncheon he’d attended, quite
frankly, because his sardonic sense of humor
has, if anything, only been sharpened by his
years of toil in the Street. He had expected, he
admitted, to be provided “a little mid-day comic
relief.”
Instead, he’d gotten acid indigestion and yet
another “in your face” demonstration of how
utterly the institutional investment world has
changed over the last decade or so—not to mention
a little real-time immersion in the rising sea
of speculative sap flowing around anything even
remotely connected to the energy sector. He
shouldn’t have been so taken aback, he later
reflected. For he knew darn well that the marine
transportation group, linked at the hip, as it is,
with surging Far Eastern demand for energy and
basic commodities, has been one of the stock
markets’ few truly bright spots for more than a
year. He knows well, too, that institutional memory
in the investment world, other than in a few
“relics” like himself, these days has a lifespan
rivaling that of a fruit fly. Still, he’d thought, the
red herring was so outrageous, the deal’s timing
so brazenly on the
heels, practically, of its
principal’s last disastrous
(for the public)
foray into the public
markets, that sparks
would just have to fly
when this fellow dared
show his face in New
York. Where the audience
was sure to
include more than a few
investment pros whose
very own institutions
had been stiffed in his
last deal, floated barely
seven years earlier.
“I was treated to a spectacle, all right,” he
recounted. “The spectacle of a room full of portfolio
managers being led like lambs to slaughter.
No one even asked what happened to the $175
million this fellow raised in junk bond financing
for something called Alpha Shipping Plc, back in
1998. Granted, these were mostly equities guys,
and everyone’s a specialist in his own little area
these days, but someone besides me has to
remember how this guy hung some of the
biggest institutions in the Street out to dry. How
he defaulted within a year of selling that package
of 10-year 9.5% senior unsecured notes
through Citicorp” Securities, with Credit Suisse First
Boston and SBC Warburg Dillon Read as co-managers.
welling@weeden FEBRUARY 28, 2005 PAGE 1 RESEARCH
