Emanuele Lauro and Robert Bugbee are not the only top shipping figures with a reason to smile after a spike in the share price of Scorpio Tankers during the past month.
Shipowner Idan Ofer will also be buoyed by the jump, having quietly invested in the New York-listed company last year.
TradeWinds has learned that Ofer and his Eastern Pacific Shipping bought about one-quarter of the 5.4 million new shares printed by Scorpio Tankers in October.
His previously undisclosed investment — which came alongside Scorpio Bulkers’ controversial delve into its sibling’s shares — is understood to have given the billionaire an overall Scorpio Tankers stake of about 3% to 4%.
Scorpio Bulkers is the largest shareholder in Scorpio Tankers, while Wellington Management holds over 7%. At below 5%, Ofer would not be required to disclose his holding and both Scorpio Tankers and Eastern Pacific declined to comment.
Strong relationship
Ofer and Scorpio Tankers chief executive Lauro have done business in the past, including co-investing in a series of containership newbuildings, and are understood to have a strong relationship.
Ofer has also invested in other public shipping companies previously, notably Gener8 Maritime which ultimately merged with Euronav.
However, while Gener8 was briefly a takeover target for Ofer, finance sources stressed that the interest in Scorpio Tankers is “a pure financial play” and fits his strong appetite for tankers ahead of IMO 2020.
Eastern Pacific has invested in a number of tanker newbuildings as well as buying the BW Group chemical tanker fleet prior to the latest rate rally in that segment.
Scorpio Tankers' shares have enjoyed a strong few weeks amid positive sentiment around product tankers ahead of the new emissions regulations arriving next year.
Rousing rally
Its share price closed at $24.27 on Monday up from $19.57 on 1 April — a rousing 24% rally in the long-depressed market of product tanker equities.
"We're happy to see the stock break out — over the past four weeks we’ve seen a tremendous number of new investors, some old friends and a number of people who are interested in the IMO 2020 dynamic," company president Robert Bugbee said.
But he was cautious about celebrating too soon. "Let's not shout about it — we’re still at only 60% of our NAV [net asset value],” Bugbee said.
“It's not like it's done much yet, and by our numbers our discount to NAV has actually widened since 1 January despite the better share price.”
Bugbee, who has long been pushing the notion that investors have been slow to realise a gathering clean products recovery, said it is difficult to isolate just one factor for the rise.
Sideways trading
"The stock has traded sideways for a long time and has had a number of runs to break our 200-day moving average, only to fall down," he said, referring to an investment measure of the average closing price for the last 40 weeks of trading.
It was like a beach ball that was held under water for a long time and one day it finally popped up
Robert Bugbee
"Then one day, it closed above the average and it didn't fall down. It was like a beach ball that was held under water for a long time and one day it finally popped up.”
Beyond improving market fundamentals, Bugbee credited presentations at conferences, some positive financial blogs and buoyant rates despite refinery adjustments ahead of IMO 2020.
Pressure on investors holding short positions — that is, betting shares would drop in price — also likely contributed, he said, although with trading volumes as high as they have been, “I think the shorts were the least of the various issues”. Because vessel valuations have firmed in the private market, Scorpio Tankers now calculates its NAV at $40 per share.
However, Bugbee believes it is time to focus less on the NAV talk. “I actually do think that we're getting shareholders into our book who don't care so much about NAV anyway — they're far more concerned with normal industry matrices like cash flow and Ebitda," he said.
