Why Did Globus Maritime Ltd (NASDAQ:GLBS) Shares Explode?

DryShips Inc. (NASDAQ:DRYS)

Why Did Globus Maritime Ltd (NASDAQ:GLBS)

Globus Maritime Ltd (NASDAQ:GLBS) was a big mover in Wednesday’s trading session its stock and experienced unusual trading volume. A rally of more than 80% came as a surprise given that the stock has been under pressure on failing to beat earnings estimates for its recent quarterly filling.

Debt Settlement

The rally’s cause is still unknown as investors wait to see if the stock will continue to power higher. Last month the company announced that it had reached an agreement with two of its lenders, DVB Bank and HSH Nordbank AG, on waivers and terms of agreements dated June 20, 2011, and February 27, 2015.

The dry bulk company says it has nice received waivers and relaxations on its loans covenants and deferred certain loan payments that were due this year.

“We are very pleased that our efforts with our lenders have been fruitful. Our agreements with both DVB Bank and HSH Nordbank AG to gain waiver relaxations of our financial covenants as well as the deferrals in our installment loan payments gives the Company a breather and allows us to concentrate on our operational activities and plan ahead,” said Chief executive officer, Athanasios Feidakis.

Full Year Earnings

The company recently reported its full year earnings for the period ending December 31, 2016. Total revenue for the period came in at $9 million – a decline from revenues of $12.72 million reported for the full year ending December 31, 2015. Net income was also lower having tanked to $9.825 million from highs of $32.4 million reported the previous year.

Globus Maritime Ltd (NASDAQ:GLBS) has attributed the drop in earnings to continued weakness in the dry bulk shipping services business. The dry bulk company has since warned that its earnings may continue drop should fuel prices, which account for the largest expense in the industry, continue to rise. The increase in crew costs is another headwind that the company is facing which could considerably affect its profitability going forward.

Globus Maritime Ltd (NASDAQ:GLBS) has also warned that it might not be adequately insured to cover operational losses that might be incurred as it continues to operate its fleet of vessels. The fact that insurers may refuse to cover some losses is an operational risk that concerns industry analysts.

Globus Maritime Ltd (NASDAQ:GLBS) stock was up by 82.38% in Wednesday’s trading session, ending the day at highs of $1.66 a share.

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.

About the author: Steve Clark is a 23-year Wall St professional with stints in M&A, risk management, and algorithm trading.

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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.

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