Dry bulk shipping falls
The web is full of information. When the Internet started taking off a few decades ago, people thought the market would become more efficient as information was disseminated. To an extent, it has. But now, people are bombarded with so much information, news, and data that it becomes hard for the average retail investor to digest, or even figure where to begin. So now, we’re going to write a timeline—a timeline of key recent events.
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February 19, 2014, wasn’t a particularly good day for dry bulk shipping companies, and the Guggenheim Shipping ETF (SEA). Shares of Navios Maritime Holdings Inc. (NM), Diana Shipping Inc. (DSX), DryShips Inc. (DRYS), and Genco Shipping Ltd. (GNK) were all down—by ~12%, ~4%, ~7%, and ~23%, respectively. The Guggenheim Shipping ETF (SEA), which invests in big marine shipping companies worldwide, was also down by 1.73%, underperforming the S&P 500’s loss of ~0.68%.
Genco Shipping and Trading, Ltd.
Genco Shipping took a big hit, as it disclosed it didn’t make a scheduled semi-annual interest payment of ~$3.1 million on its convertible bond on February 18, 2014. The company is now in discussions with Blackstone Advisory Partners LP to review financing options and ways to reorganize its capital structure, so that it can still operate as a business.
This wasn’t unexpected. The short interest of 35.68% as a percent of floating shares says it all. When there are that many shorts, there are good reasons why the stock will go south. The risk that Genco Shipping won’t be able to pay its debt and interest or maintain certain obligations has been the main reason the company’s shares underperformed for a year.
A quick look at its balance sheet at the start of 2013 shows ~$1.3 billion of “current portion of long-term debt”—essentially, the payment management expects it needs to make within one year. Given $55.05 million in cash and negative operating cash flows, Genco was a risky play—reminding investors to be careful.
Missing analysts’ estimates
Diana Shipping Inc., DryShips Inc., and Navios Maritime Holdings Inc. are well capitalized and unlikely to run into similar problems if the dry bulk industry continues to recover. But they fell anyways—DryShips Inc. and Navios Maritime Holdings Inc. in particular—after they reported earnings that missed analysts’ estimates early in the morning or the day before, sending shares down 7% and 12%, respectively.