Is DRYS Stock Hurting Investors?
There’s never a dull day for DryShips Inc. (NASDAQ:DRYS). DRYS stock is once again on the move, this time getting crushed by nearly 15%, following a wild up-and-down ride for the share price over the past 48 hours.
There’s only one thing to expect from DryShips: the unexpected. The company has earned a reputation for wild volatility and massive value swings, making it a darling of sorts among day traders interested in making a quick buck off the seismic shifts in value that DRYS stock experiences pretty much on a daily basis.
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Let’s walk back through this week alone to demonstrate my point. Monday, the stock jumps 23%, followed by an over-100% gain on Tuesday as news broke that Kalani Investments Limited bought 31.8 million shares of common DRYS stock between December 23, 2016 and January 30, 2017 for $200.0 million (more on this deal below). So everything is going great for DRYS stock, right?
Wrong.
On Wednesday, the company fell 20%, compounded by today’s drop, sending the share price further into the dumps. On the week, it’s still up 30%, but that number is by no means certain to stay put.
So having established that DryShips is a wild ride for any investor looking to jump on, let’s go through some of the news that brought about this crazy week—and may change your mind about DRYS stock going forward.
First, the Kalani investment. The company’s $200.0-million equity investment is obviously good news, and we saw that reflected in the stock price. The $200.0-million price tag on the transaction puts the shares’ value at $6.30 apiece.
But now rumors have begun popping up that Kalani doesn’t even hold the shares it received in the transaction—instead, selling them to the public for a small profit—and now holds no equity in DryShips. These are unconfirmed reports, but delving deeper into the inner workings of the deal, it’s easy to see where some spot foul play. (Source: “The Drama That is Dry Ships Inc. (NASDAQ: DRYS),” StockNewsUnion, February 1, 2017.)
George Economou, CEO of DryShips, apparently used this new cash injection to purchase ships from a company he also controls, according to reports. A move that hardly instils confidence in investors. To make matters worse, DRYS outstanding shares grew from approximately 1.1 million to over 107.9 million in less than two months. The shares then went through an 8:1 reverse split.
Consider this: an investor that purchased DRYS stock in 2012 would have lost about 99.9% of their investment.
But that just goes to show that not many traders are looking at this stock long term.
And if all that drama wasn’t enough, there’s the ongoing U.S. Securities and Exchange Commission (SEC) scandal. DryShips stands accused of using “Panama Paper” proxies and corrupt Canadian officials in order to hand over multiple false 6-K filings to the SEC. According to the allegations, the false SEC filings run all the way to the top, with our friend CEO George Economou being accused of having played an integral part in the alleged misdeeds.
