Executives for Scorpio Bulkers and Scorpio Tankers are making the most of both companies undervalued shares, according to a prominent analyst.
Scorpio Services Holding (SSH) has bought millions of dollars in shares since early May, most recently buying 155,000 shares at $12.13 on 24 September and 50,000 units at $12.04 two days earlier.
"Management realises that the share price is certainly suppressed, and they want to take advantage of this incredible sell-off and very cheap valuations for some of these names," Jefferies analyst Randy Giveans told TradeWinds.
"As a result, they want to buy shares."
Scorpio Bulkers' net asset value (NAV) stands at $25.04, while that for Scorpio Tankers comes in at $23.60, according to Jefferies — almost double their share prices.
Scorpio Bulkers shares, which trade on the Nasdaq stock exchange under the ticker symbol SALT, gained 3.2% to $13.28 by mid-afternoon trading in New York on Monday.
Scorpio Tankers stock, which can also be found on Nasdaq as STNG, slipped 0.2% to $11.10.
Buy, buy, buy
Private fund SSH, held by chief executive Emanuele Lauro's family and president Robert Bugbee, also acquired 50,000 shares at $12.96 on 11 September and at $12.97 at 2 September.
SSH, also backed by Scorpio Bulkers chief financial officer Cameron Mackey, also snapped up 100,000 shares at $12.88 on 5 August and 50,000 units at $17.15 on 11 May.
The investment vehicle, which also has Scorpio Tankers CFO and SSH president Brian Lee as a stakeholder, also took up 100,000 Scorpio Tankers shares at $10.79 on 24 September.
This was preceded by 100,000 unit grabs at $11.32 on 1 September, $12.07 on 18 August, $12.83 on 14 July and $17.36 on 1 May, according to regulatory filings.
Meanwhile, Bugbee has taken up 750,000 shares as call options: 200,000 units for $457.000 on 24 September and 550,000 of them for $2.1m on 14 July.
The total SSH investment, excluding Bugbee's personal $2.56m call-option move, comes to $12.4m and further solidifies SSH's top shareholder status at 21.4%.
However, SSH also has been an investor in new Scorpio Bulkers shares.
SSH bought 950,000 shares at $18.46/share for a total investment of $17,537,000 in a June offering of common stock. The overall offering raised more than $75m.
When added to the buys in existing shares, the total approaches $30m of SSH purchases.
SSH's stake in Scorpio Tankers, which trades on the Nasdaq stock market under the ticker symbol STNG, could not be immediately determined.
Mackey declined to comment on SSH's investments in Scorpio Bulkers and Scorpio Tankers.
SSH and other insider investment vehicles last week dumped 95% of their collective interests, or 20m shares, in struggling offshore vessel owner Hermitage Offshore.
Staying away
Low liquidity levels and focus on deleveraging balance sheets are most likely preventing Scorpio Bulkers and Scorpio Tankers from investing in themselves through share buy-backs, Giveans said.
"Across the board, there's not a huge appetite for shipping companies or economically sensitive global trade companies," he said.
"A lot of shipping stocks are trading at deep discount to NAV and unfortunately not a lot of shipping companies have the balance sheets to acquire shares.
"When you're an SSH, you can purchase shares whenever. You don't have to worry about liquidity or leverage or all these other things."
Whether or not SSH plans to take deeper positions in the Scorpio companies is anyone's guess, Giveans said.
"I don't know how much dry powder they have. I don't know if they could double or triple their position or if they are already levered up," he added.
"That's a good question, but there's no telling really."
