DryShips Surges on Commodities Rally 08 December, 2008 04:54:00 Justin Kuepper Font size: Decrease font Enlarge font
DryShips Inc. (NYSE: DRYS) shares moved up sharply with a strong rally in commodities acting as a catalyst. The owner and operator of dry bulk ships saw its shares drop precipitously over the last few months after a warning-ridden prospectus spooked investors already concerned about the crash in the spot market for dry bulk carriers.
The prospectus filing cautioned that even with fresh equity it cannot be assured that operating and capital needs would be satisfied or that it would remain in compliance with debt covenants if the low charter rates in the dry bulk market continue. The filing went on to note that the company may be required to sell vessels in the fleet that would impair its ability to conduct business.
Chief executive George Economou argued that the language was merely designed by lawyers to protect against litigation and that the company was not breaching any covenants nor was it at risk of doing so in the near future. In fact, the firm has $1.7 billion in liquidity with $456 million in cash and $1.2 billion in committed bank lines.
Low expectations have driven the stock down, but these expectations have also made the stock very vulnerable to good news. The sharp move up in commodities today sparked a rally across the industry as any prolonged increase in commodity prices could lead to subsequent increases in shipping rates, especially in the spot market in the near-term.
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