DryShips Goes For Capital Raise, Again (DRYS)

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