After a five-day voyage from under $5 per share to above $100 per share, DryShips Inc. (NASDAQ: DRYS) appears to have begun its return trip. DryShips trading was
halted on Wednesday prior to the market open due to an information request from the Nasdaq. At that point, the stock had last
traded in the low $70s. However, before shares resumed trading on Thursday, DryShips announced a $20 million registered direct offering to raise money to pay down
some of the company’s crippling debt load.
The market didn’t react well to the news. After resuming its trading at around $51, DryShips plummeted 84.9 percent to finish
Thursday’s session at around $12.
As Simple As Supply And Demand
The DryShips squeeze appears to have been caused by simple supply and demand. A series of 2016 reverse stock
splits cut the number of outstanding DryShips shares from 672 million to only about 1 million as the company struggled to stay
solvent and maintain its Nasdaq listing. The stock was down more than 98 percent in the first 10 months of the year as short
sellers piled on to make bets that the company would eventually succumb to bankruptcy.
However, surprise strength in the Chinese economy and Donald Trump’s surprise victory on Election Day triggered a rally in
shipping stocks. Buyers were joined by short sellers scrambling to cover their positions. With only one million shares available,
brokers simply didn’t have enough
inventory to go around, creating a bidding war for DryShips shares that drove the price up more than 2,000 percent in a matter
of days.
DryShips shares opened Friday’s session up 17.5 percent and were recently seen up 71.99 percent at $18.92.
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