Shares of shipping company Star Bulk Carriers Corp. (SBLK) plummeted to a 52-week low of $4.90 on Jan 9. The stock ended the day’s trading session at $5.02, down 23.12%. The sharp decline followed the company’s decision to upsize and price its primary offering of shares of common stock.
The company stated that it intends to sell 49,000,418 shares at $5.00 each with a 30-day option to underwriters to purchase an additional 1,762,500 shares. The closing of the offering is expected to occur on Jan 14, 2015, subject to certain customary conditions. The company intends to use the net proceeds from the offer to fund its new building program apart from general corporate purposes.
We note that the company had stated on Jan 8 that it would be offering shares worth $200 million through the issue. The company’s move to upsize the equity offering clearly failed to please the investors. We are also not comfortable with the practice of raising funds by selling shares as it dilutes the shareholder base.
The global shipping company further stated that its primary shareholders, namely Oaktree Capital, Angelo Gordon, Monarch and Petros Pappas, will collectively purchase 37,250,418 shares from this offering. Oaktree will own 58% of Star Bulk subsequent to the offering. The holding will be reduced to 57.4% in the event of the underwriters fully exercising their option.
Star Bulk currently carries a Zacks Rank #5 (Strong Sell). Negative earnings estimate revisions have largely contributed to the bearish rank. Over the last 90 days, the Zacks Consensus Estimate for 2014 has moved from a profit of $1.03 per share to a loss of 11 cents. The Zacks Consensus Estimate for 2015 has been trimmed by $1.57 per share to 70 cents.
However, not all stocks in the shipping industry are performing as poorly as Star Bulk. Favorably ranked stocks in the industry include Danaos Corporation (DAC), DryShips, Inc. (DRYS) and Ship Finance International Limited (SFL). All the three stocks sport a Zacks Rank #1 (Strong Buy).
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