There And Back Again: A DryShips Tale

After a five-day voyage from under $5 per share to above $100 per share, DryShips Inc. DRYS appears to have begun its return trip. DryShips trading was halted on Wednesday prior to the market open due to an information request from the Nasdaq. At that point, the stock had last traded in the low $70s. However, before shares resumed trading on Thursday, DryShips announced a $20 million registered direct offering to raise money to pay down some of the company’s crippling debt load.

The market didn’t react well to the news. After resuming its trading at around $51, DryShips plummeted 84.9 percent to finish Thursday’s session at around $12.

As Simple As Supply And Demand

The DryShips squeeze appears to have been caused by simple supply and demand. A series of 2016 reverse stock splits cut the number of outstanding DryShips shares from 672 million to only about 1 million as the company struggled to stay solvent and maintain its Nasdaq listing. The stock was down more than 98 percent in the first 10 months of the year as short sellers piled on to make bets that the company would eventually succumb to bankruptcy.

However, surprise strength in the Chinese economy and Donald Trump’s surprise victory on Election Day triggered a rally in shipping stocks. Buyers were joined by short sellers scrambling to cover their positions. With only one million shares available, brokers simply didn’t have enough inventory to go around, creating a bidding war for DryShips shares that drove the price up more than 2,000 percent in a matter of days.

DryShips shares opened Friday’s session up 17.5 percent and were recently seen up 71.99 percent at $18.92.