It only took a decade for Scorpio Group to warm up to Irish product tanker owner Ardmore Shipping.
Maybe it got lost in the onslaught of second-quarter earnings being filed by scores of public shipping companies, but on 31 July Scorpio revealed in a public filing with US securities regulators that it had taken a 5.33% stake in Anthony Gurnee-led Ardmore.
Why? Scorpio Tankers president Robert Bugbee was pretty transparent in telling TradeWinds that there was no interest in making a takeover move on the smaller owner, but a lot of enthusiasm for a recent “inflection point” in clean-product rates.
While facing a “blackout period” under securities regulations in buying its own shares, Scorpio Group decided to do the next best thing: invest in a couple of competitors in the sector, as Bugbee also tipped an undisclosed stake in Oslo-listed Hafnia.
Scorpio’s good intentions were perfectly reflected in the type of securities form it chose for the filing — a 13G.
“G for good,” Bugbee quipped.
But some of those who have been around ship finance for a while will recall that things have not always been “G for good” between Scorpio and Ardmore.
Is there a form 13B? Because “B for bad” might better describe the relationship a decade ago.
10 years later
In fact, it was exactly 10 years ago from the 31 July disclosure by Scorpio that the Monaco-based company nearly derailed Ardmore’s IPO in New York.
Scorpio already had managed to float Scorpio Tankers on the New York Stock Exchange in April 2010 with a pure play focus on product tankers.
It had that niche largely to itself for a few years and set about rapidly building a fleet, with Emanuele Lauro as chief executive and Bugbee as president.
But along came Gurnee and Ardmore in July 2013, looking to list a fairly modest fleet of eight product tankers with four newbuilding contracts — a smaller rival, for sure, but a rival nonetheless.
Just as Ardmore and underwriters Morgan Stanley were preparing to close their investor book and price the $160m offering, Bugbee and Scorpio Tankers dropped a bomb: it was also in the equity market, seeking $190m from investors in a follow-on deal.
Wall Street insiders quickly marvelled at the wicked genius behind the move: with a limited universe of investors in clean products, Scorpio had elbowed its way in simultaneously to help itself and make life difficult for its fledgling competitor.
As it turned out, Scorpio got its $190m, which had a legitimate use as Scorpio was funding an asset play in the gas sector at the time.
But Ardmore succeeded too, floating a $140m deal that was below its target pricing range but above its net asset value by most accounts.
Bugbee would tell TradeWinds at the time that he could not claim credit for the strategy, as it came from his bankers at UBS.
“The idea was very much theirs, but I wouldn’t describe us as innocent,” Bugbee said.
“If there’s a farm or a house that has nice apples, as kids we would jump over the fence and ... well, in the US you would say steal the apples, but in England it is a traditional thing that kids do, so we have a gentler word, and that’s ‘scrumping’.
“So here [in the equity move], we weren’t the kids who had the idea, we were the kids who said, ‘hey, that is fun, let’s do it’.”
People in the Ardmore camp who spoke to TradeWinds at the time were less than amused.
‘It’s too soon’
While one supporter trumpeted “a pretty strong statement that Ardmore was able to get done despite Robert Bugbee front-running us”, he also bit his lip when asked about the Scorpio tactic: “Don’t ask me that. It’s too soon. Too soon.”
Bugbee would later give Ardmore credit: “Ultimately Morgan Stanley and Ardmore’s management did a great job with the issuance”, but he was anything but apologetic, following the bouquet of flowers with a gauntlet.
“Many people say we have shown the way, blazed a path even,” he told TradeWinds. “That should be all the help from Scorpio that they should expect.
“In shipping, we compete for everything so our view to potential competition is simple — catch our coat-tails if you can, hold on fast because it is likely to be a bumpy ride.”
Bugbee was right.
There have been plenty of bumps for both companies. Scorpio built a fleet of more than 110 tankers, but not without some market reversals and heavy investor losses through the years.
Ardmore remained more modest in its growth, with the current owned fleet at 22. But it hit its stride in 2022, turning in shipping’s top performance in share price with a 326% gain (and narrowly edging Scorpio).
Streetwise reached out to Gurnee this week to ask how he feels about having Scorpio as a shareholder, but there was no response before the deadline.
We know how Bugbee feels. He has 2.3m reasons — the number of Ardmore shares Scorpio now owns — to wish his competitor well.
How do you like them apples?
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