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DryShips Goes For Capital Raise, Again (DRYS)

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By Douglas A. McIntyre Updated Published
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DryShips Inc. (NASDAQ: DRYS) just hexed its investors who were hoping to see the stock keep running over the $7.00 hurdle.  The company just announced that it has commenced a public offering of $300 million aggregate principal amount of convertible senior notes.  The company listed the use of proceeds as being for vessel acquisitions, working capital, and other general corporate purposes.  These are under an existing shelf, but the offering method here may sour some investors who recently bought stock.

Deutsche Bank Securities Inc. is the sole book-running manager for the offerings and it will also have the option to purchase up to $45 million of additional notes to cover any over-allotments.

There is an issue here that many investors hate to see, and that DryShips concurrently intends to enter into a share lending agreement with Deutsche Bank. It will loan approximately $150 million worth of shares to Deutsche Bank and will enter into an equity underwriting agreement with Deutsche Bank to sell common shares that they will be entitled to borrow.

DryShips will not receive any of the proceeds from this sale of common stock, but will receive a nominal lending fee from Deutsche Bank AG. Deutsche Bank will be required to return the borrowed shares on or about the maturity or conversion of the convertible notes.

Shares are down 6.9% at $6.56 after closing up 0.5% at $7.05 today.  It seems that the insatiable appetite for raising capital is not entirely in the rear view mirror after all.

JON C. OGG

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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