Image source: Getty Images.
Shares of DryShips (NASDAQ: DRYS) surged on Monday, up more than 60% by 11:45 a.m. EST. Today's rise is the continuation of the company's epic run over the past week:
Fueling that run are two drivers. First, the company is actively working with lenders to restructure its bank credit facilities. Three of them have matured, and the company has yet to make final balloon payments, instead suspending principal and interest payments to preserve liquidity. However, the company has been actively selling off vessels to pay down its revolving credit facilities. For example, at the end of October, it announced the sale of five vessels for $29.4 million. Given the steps it is taking to address its credit facilities, there's some growing optimism in the market that DryShips can restructure in a way other than going through bankruptcy.
In addition to that, the
As a deeply indebted, heavily shorted stock, DryShips is surging on some hints of optimism that it might not sink into bankruptcy. That said, the company has yet to secure a deal with lenders, and there is absolutely no guarantee that it will. Moreover, the recent spike in the BDI does not necessarily mean the price of shipping capacity will remain elevated. Because of this, DryShip's stock could continue to be quite volatile in the future until there's more certainty about both its financial situation and capacity pricing in the shipping sector.
10 stocks we like better than DryShips
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the
*Stock Advisor returns as of November 7, 2016