OceanPal Apparently Not Your Pal
Fool *me* once, shame on you. Fool *me* twice, shame on *me*.
Since the markets have been strong the last couple of years and owners have been making money, this allowed some to clean up their acts. Plus humans have short memories and many may have forgotten how dilutive and ridiculous some of these actors have been over the years. But then they found Maxim.
We had not really been following OceanPal, but we recently saw the stock, and thought WTF. You can also check out Performance Shipping as well, a similar story involving the same players, just different family members.
So in 2021, OceanPal was listed via a spin-off from Diana Shipping with three vessels.
After the spin-out there was the “IPO” in early 2022.
On January 25, 2022, we closed an underwritten public offering of 15,571,429 units at a price of $0.77 per unit, each unit consisting of one share of our common stock (or one pre-funded warrant in lieu of one share of our common stock) and one Class A warrant to purchase one share of our common stock.
In addition, certain selling stockholders affiliated with us (the “Selling Stockholders”) sold an aggregate of 628,571 shares of common stock in the offering. Each share of common stock sold by a Selling Stockholder was sold with one Class A warrant to purchase one share of common stock.
Diana sold shares for the IPO, ironically (or not) under the investment vehicle, “Sweet Dreams”. There are probably some jokes to write about this, “sweet dreams for us, as we off-load these shares to you” which will go to ~zero.
Paliou acquired beneficial ownership of an additional 304,401 Shares in connection with the spin-off transaction through shares of Diana Shipping Inc. held as of the record date of the spin-off transaction by 4 Sweet Dreams S.A. (“4 Sweet Dreams”), an entity wholly-owned by Paliou.
Later in the year, there was a Series D Pref issued for the drop down of a Cape. And then another offering was proposed in November 2023, with more warrants.
Of course the stock continued to trade down, and by the end of the year a reverse stock split was executed to stay compliant with Nasdaq on December 22, 2022 (10 to 1).
Equity issuance continued.
On February 10, 2023, we issued 15,000,000 units with each Unit consisting of one share of common stock (or one pre-funded warrant in lieu of one share of our common stock) and one Class B Warrant.
Another drop down. Another reverse equity split.
Determined to effect a one-for-twenty reverse stock split of the Company's common shares, par value $0.01 per share. -June 2023
Over that time, here is what the BDI has done. So the market has not helped, but hard to fight the dilution in any market.
Today, the Company has 5 vessels and a market capitalization of $2M and change. The fees paid for equity issuances now dwarfs the market cap (7.5% to Maxim + legal + related company shenanigans).
OK great, thanks for pointing out the obvious, what does this mean?
If you are a budding maritime equity investor, please reach out to Three Sheets as a quick idea screener before selecting various equities. Like Santa, we are keeping a list.
Management should be under pressure to discuss and answer for the seemingly atrocious corporate governance. The CEO was just inducted into the “Hall of Fame”, I doubt if one of the deciding factors was “CEO’s that issue the most dilutive equity?!”
Bankers and lawyers should also not be let off the hook. We do not let drug dealers sell heroin to addicts, perhaps the maritime industry needs similar customs around selling *extremely* dilutive equity to shareholders? Maxim, the architect of these transactions, besides some upset shareholders, has not faced much push-back in the community for these deals.
Yes we know, these are willing market participants who enter into these deals. But legacy shareholders expect not to be diluted to zero...
At this week’s Marine Money week in NYC, Maxim will be sharing their views on deal-making and what can get done. Will anyone ask, OK so you can get it done, but should you? All of the deals are down 95%! Companies need to “get creative” they say, what exactly does that mean?
Journalists also need to be more direct in discussing these transactions. “It is the investors fault that management diluted them to zero without batting an eye”. “They should have known better than to invest with these management teams, they wrote it right here in the disclosure”. It sounds a bit like blaming the victim. “They had it coming”.
The sector continues to battle cycles old perceptions that the industry is plagued with poor governance and bad actors.
This will likely not change if families who extract fees to their private management companies and dilute shareholders to zero are celebrated in the ‘Hall of Fame’ and given the red carpet treatment at maritime conferences and events.
