Shipping stocks have outperformed the S&P 500, Dow Jones Industrial Average, and NASDAQ 100 over the last three years, despite the pandemic and Russia-Ukraine war.
The lineup for those looking to increase their bets on US-listed shipping stocks is changing. The New York Stock Exchange and the NASDAQ have new listings. There are also ongoing departures as more publicly traded companies go private.
Most recent listings and exits
On March 20, CoolCo (NYSE: CLCO) began trading on the NYSE. The company operates a fleet of 12 LNG carriers, with several charters set to expire this year and next, exposing it to potentially rising rates.
“I describe CoolCo as Flex LNG [NYSE: FLNG] with upside,” CoolCo CEO Richard Tyrrell said this month at the 17th Annual Capital Link International Shipping Forum in New York.
Himalaya Shipping has registered for a share sale and a NYSE listing under the symbol HSHIP. The company owns 12 dual-fuel dry bulk carriers with a deadweight of 210,000 tons.
Heidmar, a well-known manager of tanker and dry bulk commercial pools, announced on March 20 that it will list on NASDAQ under the ticker HMAR following a reverse merger with the SPAC Home Plate Acquisition Corp.
Toro Corp. (NASDAQ: TORO), a spinoff of Castor Maritime (NASDAQ: CTRM), started trading on March 8.
Delta Holding Corp., a dry bulk ship manager and logistics provider, announced plans to merge with Coffee Holding Co. (NASDAQ: JVA) in late September, with the combined entity trading under the ticker DLOG. (The transaction was supposed to close in the first quarter, but no announcement had been made as of Wednesday.)
Atlas Corp., parent of Seaspan, was delisted on Tuesday as insiders, including Fairfax Financial, the Washington family, and ocean carrier ONE, took the company private.
Hoegh LNG Partners was delisted from the NYSE on January 2 after being purchased by Morgan Stanley-owned Hoegh LNG.
GasLog LNG Partners (NYSE: GLOP) appears to be the next to fail. On January 25, it received a take-private offer from its sponsor company, GasLog Ltd., which was taken private in June 2021 by insiders and BlackRock.
Market capitalization loss as a result of entry-exit mix
Shipping companies that have exited Wall Street in recent years have boasted strong long-term cash flows that have attracted large institutional buyers.
Several of the shipping companies that have arrived on Wall Street, on the other hand, have been very small companies with shares that, according to the companies, pose high risks to investors and traders.
Aside from Atlas, Hoegh LNG Partners, GasLog Ltd., and GasLog Partners, Golar LNG (NYSE: GLNG) exited shipping by selling its LNG fleet to CoolCo in December 2021. CAI, a container-equipment lessor, was purchased by Mitsubishi of Japan in November 2021. American Industrial Partners purchased Seacor in April 2021. Teekay LNG was delisted in January 2021 and purchased by Stonepeak. In October 2019, DryShips’ founder, George Economy, took the company private.
The aggregate market cap of all shipping companies taken private in recent years (or in the process of privatization) was $10.5 billion as of the day before their take-private offers.
The largest Wall Street arrival since 2019 was ocean carrier Zim (NYSE: ZIM), which went public in January 2021. Flex LNG, the second largest of the newcomers, went public in June 2019.
The other entrants had much smaller market capitalizations.
United Maritime (NASDAQ: USEA), a subsidiary of Seanergy (NASDAQ: SHIP), began trading in July of last year. In December 2021, Imperial Petroleum (NASDAQ: IMPP), a spinoff of StealthGas (NASDAQ: GASS), began trading.
OceanPal (NASDAQ: OP), a subsidiary of Diana Shipping (NYSE: DSX), went public in November 2021. Castor Maritime debuted on the NASDAQ in February 2019.
The aggregate market cap of companies listed since 2019, from Castor to CoolCo, was $5.9 billion as of Wednesday. That’s roughly half the pre-take-private-announcement market cap of the companies that delisted from the NYSE or NASDAQ or exited shipping during the same time period.
What motivates privatizations?
Many take-private transactions have involved LNG shipping companies with extensive long-term charter coverage. Atlas Corp., the most recent exit, is a container-ship lessor with long-term coverage.
Stifel analyst Ben Nolan stated at the Capital Link forum, “What differentiates the LNG segment relative to tankers and dry bulk is that you can get long-term cash flows.” Infrastructure funds, which are primarily responsible for purchasing these companies, are not making spot bets.”
Nolan also pointed out that many of the privatized companies were master limited partnerships (MLPs). “MLPs were structurally difficult, with valuations struggling to return to reasonable levels.” Going private is a viable option if there is a structural reason your stock is trading [low].”
“It’s about duration, cash flow, and predictability,” says Christian Wetherbee, a shipping analyst at Citi. That is why we have seen private capital come in and withstand the leverage required for such transactions. I’m not sure it lends itself to closer to spot or shorter durations, as seen in some of the other shipping subsectors.”
What is motivating (some) new listings?
Many of the recent new listings, as well as their subsequent follow-on offerings, have been handled by investment bank Maxim. Toro, Delta Holding, United Maritime, Imperial Petroleum, OceanPal, and Castor are among them.
At the Capital Link event, Larry Glassberg from Maxim remarked that IPOs will be challenging, but he expects opportunistic use of reverse mergers and SPACs for scaling.
Shipping companies that have partnered with Maxim have been very active in the follow-on market, raising funds for vessel acquisitions. These Maxim-linked follow-on offerings account for the vast majority of equity capital raised by US-listed shipping companies in recent years.
Maxim claims to have participated in $1.2 billion in shipping transactions since 2015. Maxim deals have been referred to as “the fountain of funding” and “shipping’s answer to Venmo” by Marine Money.
These equity sales have involved hedge fund intermediaries purchasing discounted shares and warrants and then selling them to retail investors.
Top Ships (NASDAQ: TOPS), a frequent issuer of equity through Maxim transactions, was the most popular shipping stock on Robinhood in mid-2020. Top Ships was the 37th most traded stock on Robinhood, ahead of Starbucks, Pfizer, ExxonMobil, GM, and Sony.
“From a growth perspective, U.S. capital markets are excellent for raising funds,” says Glassberg. “If there’s an opportunity to raise capital, it’s wise to take it to strengthen your balance sheet.”
Buyers should exercise caution.
Buyers, however, should exercise caution. According to Tradewinds, share sales by Maxim-linked microcap shipping companies are highly contentious due to retail investors’ losses.
In contrast to larger shipping companies, which are generally not selling equity now and whose shares rise when market fundamentals improve, shares of microcaps doing follow-on offerings through Maxim are falling over time as a result of continued dilutive equity sales (and the threat of future sales) — a risk fully disclosed in prospectuses.
During Imperial Petroleum’s quarterly call last month, CEO Harry Vafias was asked how long the company’s equity sales, which have “destroyed a lot of capital,” would continue. The stock price of the company has dropped 89% in the last year.
Vafias has openly stated that equity sales will continue. “We are still a very small shipping company on a global scale.” By global standards, ten ships is clearly not a large fleet. We have funds to grow. Even with this money, we won’t be able to double or triple the fleet. For the time being, we will continue with the [equity offerings] until we have sufficient funds to build a fleet large enough to compete with the global players.”
