About 10 days ago, I provided an update on the carnage for shares of DryShips (NASDAQ:DRYS). Shares continued to plunge following news of the fifth reverse split in 13 months, and I stated that things were likely to get much worse. Unfortunately for investors, shares continue to sink, and the company’s latest filing regarding the Kalani sale shows there is still a long way to go.
As of my previous article, DryShips was set to have about 47 million shares outstanding, along with $188 million worth of shares remaining to be potentially sold in the latest Kalani deal. Even though shares continue to fall, there has not been that much of a change in the latest program as seen in the most recent 6-K filing:
As mutually agreed to by the Company and the Investor, the Company sold (“I”) 797,432 Shares to the Investor, pursuant to a Fixed Request Notice with a Fixed Amount Requested of $5.0 million, following a Pricing Period of April 10, 2017, for a Fixed Re quest Amount of approximately $1.82 million at a price per share of approximately $2.28 mutually agreed to by the parties, resulting in estimated net proceeds of approximately $1.80 million, after deducting estimated aggregate offering expenses, and (ii) 7,115,017 Shares to the Investor, pursuant to a Fixed Request Notice with a Fixed Amount Requested of $25.0 million, following a Pricing Period from April 11, 2017 to April 17, 2017, for a Fixed Request Amount of approximately $12.71 million at a price per share of approximately $1.79 mutually agreed to by the parties, resulting in estimated net proceeds of approximately $12.58 million, after deducting estimated aggregate offering expenses.
Between the date of the Purchase Agreement, April 3, 2017, and April 17, 2017, the Company has sold an aggregate 16,835,593 Shares to the Investor at an average price of approximately $3.15 per share. The aggregate gross purchase price for these Shares was approximately $52.97 million. The Company’s estimated aggregate net proceeds from the sale of these Shares is approximately $52.44 million, after deducting estimated aggregate offering expenses. Following the settlement for all of such Shares sold as of the date hereof, the Company will have a total of 54,923,434 shares of common stock outstanding. As of the date hereof, up to $173.43 million of the Shares is remaining that the Company may sell pursuant to the Purchase Agreement.
So now we are up to nearly 55 million shares outstanding, meaning investors have already been diluted by more than 44% so far in this Kalani purchase. Additionally, there remains more than $173 million worth of shares remaining that could be sold. That number is extremely important, because as of Monday’s closing price, DryShips only had a market cap of $106 million.
Assuming that the rest of the Kalani deal is concluded – which seems likely given all of the previous ones were – investors stand to see the diluted share count possibly triple from here, if not more, because you figure share sales will continue to occur at lower prices. If we assume $1.50 for the remainder, which seems generous given the pattern over the past few months, that’s another 115 million shares plus to be sold. Take the average price down and the math obviously gets much worse.
On Monday evening, DryShips provided the latest update on the Kalani sale, and investors may be surprised th at there’s still over $173 million worth of shares that could be sold. The chart below shows how this stock continues to plunge, down more than 89% in the past two months alone. With the potential for well over 100 million more shares to be sold, it would not surprise me if we see another reverse split before this Kalani deal ends. Don’t get fooled either if we get any more dividend news, as those pops have quickly faded time and time again.
(Data sourced from Yahoo Finance)
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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