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Shares of DryShips (NASDAQ: DRYS) continued their seemingly never-ending slide on Monday, falling another 10% as of 10:45 a.m. EDT. The sell-off appears to be in reaction to a series of news items from last week.
Last Friday the company announced yet another vessel acquisition, this time buying one more Kamsarmax dry bulk carrier for $24 million. As a result of this deal, DryShips will own five of these vessels once all get delivered by the third quarter. The company also announced last Friday that it took delivery of a recently acquired Aframax tanker.
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In addition to that, DryShips was the target of aWall Street Journal article last week, which detailed how founder and CEO George Economou has made millions on the company even as its stock has continued to sink. One way he's profiting is because companies he owns earn fees for managing vessels for DryShips. The article pointed out that Economou's making millions from this arrangement, and because he controls virtually all of DryShips via preferred stock, he's able to bleed individual investors dry with one dilutive offering after another to buy more ships and earn more fees.
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That's not likely to change after the company amended its Form 20F last week, which highlighted the fact it does not intend to comply with the higher listing standards of the Nasdaqbecause, as a foreign issuer, it doesn't have to comply. As a result, it doesn't need to obtain shareholder approval to issue securities or adopt equity compensation plans. Likewise, it only plans to have two independent directors on its audit committee instead of the required three. That watered-down corporate governance should be a bright red flag for investors.
One thing that's clear about DryShips is that its focus isn't on creating value for investors. Instead, the company's sole purpose appears to be on enriching Economou at the expense of shareholders. Investors should steer clear of this stock because there is a high probability that they still won't make any money even if the company's turnaround strategy proves successful.
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