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Ocean shipping on Wall Street: the sound of silence

If you’re an owner in ocean shipping, you can hear the crickets on Wall Street. The pullback of activity in the U.S. capital markets this year has been staggering.

Many of the equity analysts that covered ocean shipping at U.S. investment banks are no longer at those jobs. The question-and-answer periods at the end of quarterly conference calls have become very short because few analysts are left to pose questions.

Shipping executives are compensating by spending more time filling out their conference calls by reading lengthy scripts about market conditions. The ultimate embarrassment, which is no longer particularly uncommon for public ocean shipping companies, is when the chief executive officer finally opens the call to questions – and there aren’t any. Just crickets.

Proceeds raised by U.S.-listed shipping companies from equity and debt offerings are at historic lows as the third quarter of 2019 draws to a close.

Capital-raising activity is so low in New York that Norway – a far smaller market in terms of average deal size – could conceivably overtake the U.S. in terms of gross shipping proceeds by year-end. Before 2019, Norway has never been even close.

How bad is 2019?

According to an analysis of public securities filings by FreightWaves, U.S.-listed ship owners have raised an aggregate of $598.9 million in gross proceeds since the beginning of this year, putting 2019 on pace to be the worst year ever for shipping proceeds since the industry came to Wall Street in the early 2000s.

U.S.-listed companies raised almost $3.5 billion in proceeds in the first nine months of 2018, almost six times more than this year’s take. To put this into further perspective, 2018 was actually a bad year for ocean shipping capital-raising. Full-year proceeds for U.S.-listed owners in 2018 totaled $3.98 billion, less than half the $8.17 billion raised in 2014.

The situation is particularly abysmal for sales of common equity, given sentiment headwinds from trade tensions and recessionary fears. In 2019, there have been just two very small offerings totaling a mere $24.3 million, done by micro-cap Greek-sponsored companies: bulker owner Seanergy (NASDAQ: SHIP), which grossed $14.3 million in May, and product-tanker owner Top Ships (NASDAQ: TOPS), which has priced and is closing a $10 million deal now. In both cases, equity was sold with warrants attached and the offerings have been highly damaging to the stock price.

By this time last year, U.S.-listed ship owners had raised $348.2 million from common-equity sales, over 14 times the current year-to-date total. U.S.-listed shipping companies raised $648.2 million from common-equity sales in full-year 2018, their worst full-year performance since the sector started to go public in the early 2000s.

There have been no shipping initial public offerings (IPOs) in the U.S. market since June 2015, although companies continue to list in America via so-called ‘direct listings’ in which no money is raised from equity sales.
Source: FreightWaves, Greg Miller (https://www.freightwaves.com/news/tag/greg-miller)

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