How DryShips (DRYS) Became The Next Sirius XM (SIRI)

Sirius and XM Satellite Radio were among the great cult stocks of the last decade. They were heavily traded and volatile. Investors expected their business to be the most important development in consumer electronics in years. By the time they had fought the government for over a year to complete a merger, the new company, Sirius XM (SIRI), was nearly dead. Sirius had gone from over $60 in 2000 to $.05. The company is nearly forgotten.

The firm that has taken the place of Sirius among market gamblers is DryShips (DRYS), the Athens-based shipping company. A year ago, the stock traded at $116.43. Recently, it dropped to $2.72. Over 35 million shares in Dryships trade in an average day.

By most measures, DryShips is tiny, which makes the market’s obsession with the company even more fascinating. Last quarter, the firm has revenue of $196 million, down 15% from the year before. The company lost $101 million compared to a profit of $176 million in the same period last ear when DryShips had a market cap of $18 billion.

DryShips stock is rising again. It trades near $10. Earnings were poor but beat forecasts. The company raised $500 million. The collapse in global trade that nearly brought the company down is easing.

DryShips will probably survive, but it won’t trade over $100 again. Too many people follow the stock now. They can see the company’s vulnerability which is exactly what happened to Sirius XM (SIRI). It dawned on the satellite radio firm’s investors that it was just an ordinary company, perhaps too ordinary to stay in business.

Douglas A. McIntyre