DryShips Inc. (NASDAQ:DRYS)
DryShips Inc. (NASDAQ:DRYS) plunged by more than 30% after announcing a 1-for-5 reverse stock split of common shares. A shareholder’s annual general meeting last month approved the split, giving the board the mandate to determine the exact split ratio.
1-for-5 Reverse Stock Split
Reverse stock splits are normally used to strengthen a stock price if a security is in danger of falling below a key level. However, that was not the case after the Drybulk carrier announced its reverse stock split ratio.
DryShips Inc. (NASDAQ:DRYS) has underperformed the overall industry having traded below the $5 a share since May 15. Closing at record lows of $1.70 last week appears to have spooked the management team, prompting the reverse stock split that it now hopes will revitalize the sentiments of institutional investors.
The ocean-going cargo vessel’s 1-for-5 reverse stock split will come into effect on June 22 under the trading symbol ‘DRYS’. The split will reduce the number of the company’s shares to 4.8 million from 24.1 million.
“No fractional shares will be issued in connection with the reverse split of the issued common shares. Shareholders who would otherwise hold a fractional share of the Company’s common shares will receive a cash payment in lieu thereof at a price equal to that fraction to which the shareholder would otherwise be entitled multiplied by the closing price of the Company’s common shares on the Nasdaq Capital Market on June 21, 2017,” DryShips Inc. (NASDAQ:DRYS) in a press release.
The 1-for-5 split is the second in a span of less than two months. Early last month DryShips initiated a 1-for-7 reverse stock split as it sought to revitalize investor’s attitudes towards the company. Last month’s split reduced the company’s shares to 9.6 million from 65.6 million. However, the share count more than doubled as the company sold more shares in private stock offerings as part of a capital raising drive.
Dilution has considerably overwhelmed DryShips Inc. (NASDAQ:DRYS) amidst growing financial health concerns. The stock is currently down by more than 90% for the year as fears of the stock dropping below the $1 a share mark continue to grow.
DryShips Inc. (NASDAQ:DRYS) dropped in Monday and Tuesday’s trading sessions and now stand at $1.02 – establishing a new 52-week low.
I have no positions in any of the stocks mentioned, and have no plans to initiate any positions within the next 72 hours. All information, including any data, is provided without any guarantees of accuracy.
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About the author: Steve Clark is a 23-year Wall St professional with stints in M&A, risk management, and algorithm trading. Steve keeps his head in the game by looking for, and writing about, small companies that often get overlooked by the big investment firms.