John Fredriksen’s Ship Finance International is keeping a concerned eye on the falling number of US shipping analysts following a host of departures this spring.
Morgan Stanley last month added its name to a list of those with questions around shipping coverage after the exit of star maritime analyst Fotis Giannakoulis.
It was the fifth bank to wholly or largely drop coverage in quick succession after Credit Suisse, UBS, Seaport Global Securities and Maxim Group.
Ole Hjertaker, chief executive of Ship Finance, told TradeWinds that the trend comes at a time many shipping stocks in the US are relatively illiquid and difficult to invest in, while in Oslo shipping accounts for a far larger slice of the capital markets system.
“This is one of the reasons why the Norwegian investment banks retain a relatively high proportion of shipping analysts, while in the US we have seen many shipping analysts departing, which is an issue,” Hjertaker said during an interview at the company’s Oslo office during Nor Shipping.
Trend 'a concern'
“How can you generate the investor interest if you don’t have analysts who can promote the industry and the companies and highlight the difference between them?”
Hjertaker said the trend is a concern for shipowners, but analysts located elsewhere, predominantly in Oslo, are still able to provide good coverage of several US-quoted shipping companies.
“While these analysts are not located in the US, they travel to the US and meet investors regularly," he said. "So, for the traditional shipping investors, the hedge funds and private equity investors, they still get good coverage out of Oslo, despite the declining US coverage.
“The issue is how do you cover the rest of the market, the long-only funds and retail investors? This is more of a long-term concern for shipowners.”
While lower trading volumes of US stocks is putting pressure on the banks due to falling commissions, Hjertaker said regulation may also be contributing, highlighting experience from a Ship Finance notes issue in the US last year.
“One of the analysts from a bank central in the placement called me after we sent the press release and I was as shocked as anyone,” Hjertaker recalled.
“I was convinced that the analyst was ready for the road and calling investors but, instead, he was asking me what the terms were.
'Dramatic development'
“If you see that in combination with the big drop in commissions generated from trading generally in the US market, suddenly you have a dramatic development in the market outreach to US investors.”
In the past two weeks, Oslo has seen a flurry of capital markets activity, with 2020 Bulkers, Hunter Group and Belships all having issued new stock.
However, Ship Finance chief financial officer Aksel Olesen does not believe the tide has turned for shipping in the US capital markets.
“You can probably not raise, significantly, capital in the US market right now,” he said.
“But the general sentiment towards shipping and energy may change on short notice, and particularly if we see some positive momentum from US oil exports and lower trade tension.”
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