The other shoe has dropped.
Evercore ISI is about to chop coverage of all three dry bulk owners under its research as it continues to reallocate analyst resources following veteran researcher Jonathan Chappell's move into railroads in March.
Genco Shipping & Trading, Eagle Bulk Shipping and Scorpio Bulkers management teams were getting the word from Evercore on Wednesday afternoon ahead of an imminent official release.
Evercore ISI confirmed the cuts late on Wednesday in New York, and also added Golar LNG Partners to the list.
Chappell also told TradeWinds: "We need to allocate our time and resources on sectors/equities that have broader institutional investor appeal. Market cap and trading liquidity play a large role in that decision, but the ability to actually invest throughout a period or cycle is important as well.
"I told you when we launched on North American railroads in March that the expansion into broader US surface transportation would not end there, so you can assume that there are larger, more well-capitalised, investible companies set to come under our coverage umbrella through the rest of the year. And we just don’t have the capacity to keep adding without culling where there is less investor interest."
In March, Chappell took up research on six rail companies in addition to the 23 shipowners already under his review.
Evercore had trimmed containership player Capital Product Partners and dry owners Diana Shipping and Safe Bulkers in December last year.
Evercore retains coverage of eight tanker names and 11 owners across the gas sector.
Chappell, the dean of US shipping analysts, followed Deutsche Bank's Amit Mehrotra into rail coverage, telling TradeWinds in March that larger market capitalisation was a factor.
The largest rail company had a $90bn share value. The smallest was $12bn — still six times the largest shipowner under Chappell's coverage.
"It's a move to broaden our relevance both internally and externally, a move towards greater market capitalisation and trading potential," Chappell said.
Speaking of the scale of the rail names, Chappell acknowledged: "That's certainly what you would call more investible."
Of the three owners dropped by Evercore, Genco had the largest market cap at just over $260m. It traded less than $1.3m worth of shares on Wednesday.
During the interview with TradeWinds in March, Chappell had also addressed the issue of further shipping cuts.
"Rails is a first step, but no one covers just railroads," he said. "Once you cover rails, you're covering trucking and logistics.
"There are no obvious drop candidates in shipping, but if shipping continues out of favour and other stocks make more direct business sense, you can never say never."
