DryShips Inc. (NASDAQ:DRYS)
Shares of DryShips Inc. (NASDAQ:DRYS) crumbled in Friday’s trading session after the company became the subject of class action lawsuits over claims of stock manipulation. The stock was down by 27.91% to end the week at $2.17 a share. Last week’s sell off also came after the company effecting another reverse stock split and issuing an updated financial report.
Stock Manipulation Claims
DryShips Inc. (NASDAQ:DRYS) is an international shipping company that operates ocean cargo vessels worldwide. The firm operates through two segments – drybulk and offshore support. Founded in 2014, the company currently owns 13 Panamax Drybulk vessels, and 6 offshore support vessels.
The Greek carrier finds itself in a tight spot over stock manipulation claims that have seen it shed more than 90% in value over the last six months. Law firms behind the class action lawsuits allege that in a series of transactions beginning last year, DryShips Inc. (NASDAQ:DRYS) raised hundreds of millions of dollars by selling newly issued shares directly to Kalani Investments Ltd.
The money that came from Kalani allowed the shipping company to double the size of its fleet even as the stock continued to plunge.
Reports indicate that the company sold the vast numbers of newly issued shares to the British Virgin Island firm at a discount. The firm in return unloaded most of the shares immediately after the stock soared to all-time highs in November, followed by the stock’s plunge.
In their class action lawsuits, law firms allege that because Kalani purchased the shares with the intention of reselling them immediately the transactions amounted to ‘Pseudo underwriting.’
Reverse Stock Split
In a bid to counter the downward pressure, DryShips Inc. (NASDAQ:DRYS) has resorted to reverse stock splits as it tries to stay afloat. Late last year, the company carried out a 1:15 reverse stock split as it sought to strengthen the value of its share price. The company is also fresh from effecting a 1:7 reverse stock split as it tries to shore up the share price even further.
Extreme dilution is now a point of concern given the amount of DryShips Inc. (NASDAQ:DRYS) shares that are floating in the market. A massive net loss in the recent quarter has also rattled investors fuelling the sell-off wave that now threatens to push the stock to all-time lows. The company has already suspended debt payments arousing concerns over its financial stability.
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: Marc has a degree in economics and a MSc. in Finance. Marc worked for global investment firms in Europe and the United States as an analyst, fund manager, and consultant.