New Dawn as Dry Bulk Companies Recover from a Financial Abyss
As we delved into the financial ruins of dry bulk listed companies last February, we spectacularly portrayed a distressing narrative. Like a telltale EKG tracing, we traced the accumulated deficit at the end of December 2020. The shocking $9.5bn collective loss, tracked in our survey of ten companies, is what stood out, grossly burdening these businesses since their respective IPOs.
Our exposition met a wave of well-uttered viewpoints. Chief among them was the highlight of the available 2021 accounts that revealed a robust amelioration, a redeeming ray of hope compared to the gloomy 2020 figures.
From Despair to Hope: The Deficit On Downward Trajectory
Pointedly, we learn that a turning point had been reached — the nadir being the accumulated deficit in 2020. In light of this, it seemed only appropriate to revisit the numbers, factoring in the accounts for 2021 and 2022. What does the graph reveal now? An encouraging plunge in accumulated deficits, now standing at $5.8bn from the resounding $9.5bn.
Specifically, Dryships, Scorpio, and Paragon were the heavyweights, flagging disastrous numbers. However, having now weathered the storm, the remaining companies’ deficit has diminished to a $418m figure since enlistment — a staggering tenfold decrease since the end of 2020. It’s a tip of the hat to the favorable market conditions that prevailed in both 2021 and 2022.
Emerging in the Black: Companies Gaining Ground
Moreover, the financial landscape is truly transforming. Three companies, namely Star Bulkers, Golden Ocean, and Safe Bulkers, are now showcasing appealing profit margins, bringing a tinge of black to the previously all-red bottom lines.
However, some points of concern were raised regarding an overemphasis on earnings. After all, aren’t investors acquiring lucrative profits through capital gains, via the age-old strategy of buying shares low and selling high?
Deciphering Share Prices: From IPO to the Present
To nip this question in the bud, we embarking on a journey to unravel how the share prices of our sampled companies have evolved over time. Have investors, who might have been short-changed in terms of dividends, been making gains with the careful buying and selling of shares? A cursory glance at each company’s present share prices against their IPO prices would suggest so.
Reverse Splits: Sign of Failure or Financial Ingenuity?
However, there’s a catch. Merely aligning today’s share prices with initial public offer figures is akin to comparing apples and oranges. Why so? Most companies under our scanner, with two exceptions, have been enlisting in the infamous penny shares club. Stock exchanges, following rules such as the $1 rule, strongly prompt companies to maintain share prices above $1, or risk being delisted.
Survival in the Market: Investing in the Dry Bulk Companies
Taking all of this into account, the remaining companies from our sample seem to be sailing into rough waters with a history of prolonged poor market patches. Having brought about minimal returns over a lengthy period, their average yield sits at an unimpressive -70% for every $10,000 invested since their IPOs.
How are these companies still standing strong amidst these results? The secret might lie in the ingenious use of financial jargon like EBITDA, extraordinary items, and non-recurring items when reporting their earnings, not forgetting the investor’s penchant for risk and profit-seeking behavior. All said and done, those investors who dared to short-sell these stocks would have ended up amassing a fortune.
