When Greek shipowner George Economou revealed a 9.5% stake in New York-listed Performance Shipping on 25 August, one could fairly ask this question to a man who’s often been first to spot a trend: “George, what took you so long?”
Economou was just the latest to join an 18-month pattern of increased owner-on-owner investment in public companies as shipping figures seem to have partly stepped in where third-party institutional investors have stepped out.
The latest round of owner investment arguably began at the start of 2022 as John Fredriksen ratcheted up his stake in Belgian tanker giant Euronav. That turned out to be the prelude to a failed merger attempt, about which much has been written and won’t be repeated here.
But it was just the start as Fredriksen moved into New York-based International Seaways in April last year, to be followed in October by both Idan Ofer’s Eastern Pacific Shipping and the Navig8 Group.
A more recent trend has seen cash-rich container ship owners stuck in a struggling market move into dry bulk listings, and product tanker market giant Scorpio’s private arm taking large stakes in listed rivals.
None of the other activity has come close to a merger attempt to date, in part because target shipowners such as International Seaways and Eagle Bulk Shipping have popped anti-takeover “poison pills” into their bylaws.
And it is possible, even likely, that some of these investments were never fuelled by consolidation to begin with, but rather just investments in what fellow shipowners recognised as undervalued stocks.
With that said, we thought we would check in on the health of a few of these investments to date.
In some cases, it was not possible to determine the cost basis of the shipowner getting into another stock, so the prevailing share price before the disclosure was used. We also attempt to incorporate dividends received where relevant.
Fredriksen on Seaways: The Norwegian shipping magnate reported an initial stake of just over 8m shares, or 16.19%, in the diversified New York-listed tanker owner on 27 April 2022 for a total consideration of $163.3m, or a little over $20 per share.
Seaways closed trading on 28 August at $44.55, suggesting a profit of some $193m on the shares alone.
But Seaways also has paid dividends of $4.98 over that time, adding a further $40m to Fredriksen’s account. Bottom line: a $233m profit, or 142%, on the original investment.
Idan Ofer’s Eastern Pacific on Seaways: The Israeli billionaire was next in on the Lois Zabrocky-led owner less than six months after Fredriksen. There was no accounting of funds spent on the 2.48m shares acquired, a 5.05% stake, so an estimate of returns to date is limited.
However, Seaways stock closed at $35 per share the day before the disclosure. On that basis, profit on the shares is about $24m on an initial investment of about $87m. To note, the profit is probably higher as Seaways’ shares were rising for some time ahead of the disclosure.
Add another $12m or so in dividends, and Ofer has a minimum profit of $36m on an $87m investment, a 41% return.
Navig8 Group on Seaways: The global ship-management and shipowning platform, led by Nicolas Busch and Gary Brocklesby, revealed it was backing Seaways just one day after Ofer.
Navig8 said it had spent $77.9m on 2.5m shares, or 5.1% of the company. That is a cost basis of just over $31 per share. That puts Navig8’s profit on the shares at roughly $33.5m.
Throw in a further $12m in dividends, and the bottom line is a $45.5m profit, a return near 58%.
Danaos on Eagle Bulk: The Greek container ship owner’s move on the Connecticut-based dry trader was another headline-maker, especially after Eagle Bulk blocked further accumulation with a poison pill.
The John Coustas-led outfit did not report how much it paid for an initial 1.37m shares, or 9.9%, in Gary Vogel’s company on 16 June. Nor did it cite a price when it expanded to 1.55m shares on 22 June.
Again, using the inexact measurement of the prevailing share price, Danaos may have paid about $70m for the shares. The same shares today are worth about $64.6m, a loss of $5.4m.
Danaos would have received about $900,000 worth of dividends on the reported holding, bringing the loss to some $4.6m, or more than 6%.
Castor Maritime on Eagle Bulk: The Panayotides family’s Cyprus-based outfit has been one of the chief beneficiaries of controversial equity raises by US investment bank the Maxim Group, and it put money to work in buying 1.39m shares, or 14.99%, in a larger Eagle Bulk.
Castor did not say how much it spent when it disclosed the buy on 30 June, but Eagle Bulk had closed at $46.34 per share on the previous day. That puts the outlay at just over $64m. The same shares were worth about $58m this week. Castor would have received $806,000 in dividends, bringing the loss to just over $5m.
However, it is worth noting that Castor marked its Eagle Bulk position to market at the end of the quarter and reported an unrealised gain of $2.6m, which suggests it acquired shares at a lower price than we are using in the calculation.
Scorpio Services Holding on Ardmore Shipping: The private Scorpio insiders group disclosed on 31 July that it had bought 2.3m shares, or 5.3%, in long-time Scorpio Tankers rival Ardmore Shipping of Ireland.
Scorpio president Robert Bugbee said the outlay, and another unspecified buy in Oslo-listed Hafnia, reflected conviction that an “inflection point” had been reached in clean product rates.
Scorpio did not say how much it paid for the Ardmore shares. But at the most recent closing price of $13.55, the cache would have been worth just over $31m.
Ardmore shares were priced lower this week at $12.65, slicing the value to $29m, or a loss of about $2m. But Scorpio was eligible to collect more than $400,000 in dividends, slicing the loss to $1.6m.
More ship-finance news
Singapore VLGC player BW LPG plans to seek a dual listing in the US, but the Anders Onarheim-led shipowner provided few details of the venture. Click here to read.
The private Scorpio Services Holding of Monaco is looking in a new direction for its latest investment — and that direction is up. Scorpio has become the largest outside shareholder in Oslo-listed budget airline Norse Atlantic Airways. Click here to read.
Analysts believe Hafnia is set to pay out even bigger dividends in the third quarter as money pours in. The company’s policy is to hand out 70% of earnings if the loan-to-value (LTV) ratio falls below 30%. Click here to read.
