At this point, these massive short squeezes in DryShips Inc. DRYS are getting to be a routine occurrence. On Friday morning, the company announced the sale of $100 million of DryShips stock at a price of $2.75 per share to “entities affiliated with its Chairman and Chief Executive Officer, Mr. George Economu.”
At the same time, DryShips also announced the termination of its previous stock purchase deal with Kalani Investments Limited. After DryShips underwent three reverse stock splits in 2016, the company announced in November that it had secured $100 million in financing from Kalani, leaving many investors to speculate that Economou is actually the one pulling the strings at Kalani.
Dryships' Unique Position
DryShips shares surged more than 60 percent on Friday, a move that was likely due more to market dynamics than Friday morning’s news.
In the past year, DryShips has undergone a series of five reverse stock splits in an effort to maintain the $1 minimum listing price on the Nasdaq. A single share of DryShips stock today would represent 7,840 shares of stock just one year ago. Adjusted for the splits, DryShips' share price is down more than 99.9 percent in the past 12 months.
As a result of the reverse splits, DryShips’ share float has been drastically reduced. That shrinking float coupled with DryShips’ massive outstanding short position had laid the foundation for a handful of epic short squeezes, such as the one taking place on Friday. According to Yahoo Finance, DryShips’ float is now down to only 287,000, and its short percent of float stands at a staggering 326.9 percent.
The big move in DryShips has even triggered several shipping sympathy trades on Friday. Euroseas Ltd. ESEA is up 4.3 percent, TOP SHIPS Inc TOPS is up 14.5 percent and Globus Maritime Ltd GLBS is up 8.0 percent.
Traders looking to profit off of low-float, high-short stocks like DryShips should be aware of the risks involved.
“If you’re looking for any wisdom here on Benzinga’s PreMarket Prep show, it’s just stay out,” PreMarket Prep co-cost Joel Elconin said of these types of stocks earlier this year.
Co-host Dennis Dick agreed.
“I’ve been trading professionally for 17 years, and I can’t trade this stuff,” Dick added.
He urged traders to focus on more boring, predictable stocks where there is more opportunity to gain a trading edge and less guesswork involved.
At time of publication, shares of DryShips were up 63.41 percent at $3.35.
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