The company, Tankships Investment Holdings, is looking to rake in up to $100m from a share sale that will set the stage for a Nasdaq listing.

The DryShips spin-off, which currently controls four suezmaxes and six aframaxes, intends to apply a portion of the proceeds towards the acquisition of three 157,000-dwt tankers from affiliates of Economou and his former wife.

When pressed for an opinion about the Greek shipping magnate’s latest foray into the capital markets the reaction from industry observers was mixed.

A number of brokers argued that the $209m price tag tied to the suezmaxes that Tankships intends to acquire represents a premium of approximately $10m, a claim that is supported by valuations calculated by the VesselsValue.com portal.

Fees fan debate

Critics feel the fees that Tankships must pay to its chief executive’s private shipping interests are high as well but advocates believe they are in line with the current industry average.

Opponents are also concerned that dealings with Economou’s affiliates could create conflicts of interest, a possibility that the company identified as a risk in its most recent prospectus.

If Tankships purchases newbuildings TMS Tankers (TMS) will be able to collect a “construction supervisory fee” that amounts to 10\% of the budgeted supervision cost.

The same company is entitled to a “daily management fee” that works out to more than $2,000 per vessel per day, “discretionary incentive fee” and 1.25\% commission on charter hire agreements.

When TMS arranges sale-and-purchase deals Tankships has agreed to pay a 1\% commission that will be based on the price of the asset that changes hands, according to yesterday’s prospectus.

In addition, Cardiff Tankers, another Economou affiliate, is poised to collect a 1.25\% commission on charter hire earned by all of the new venture’s vessels.

Vivid Finance, which is controlled by the shipping mogul as well, is one of the few entities that isn’t entitled to any fees since it agreed to provide consulting services related to the sourcing of cash at no charge to Tankships.

Going concern

The same individuals who expressed concerns about fees claim they were rattled when they read about a working capital deficit that has, in the words of the IPO hopeful’s auditor, “raised substantial doubt about [its] ability to continue as a going concern”.

They also noted that Tankships warned investors who plan to participate in the offering, which is backed by DNB Markets, that they will suffer what the prospectus described as “substantial dilution”.

“The initial public offering price per common share will be substantially higher than our pro forma net tangible book value per share immediately after this offering,” the operator wrote.

“As a result, you will pay a price per common share that substantially exceeds the per share book value of our tangible assets after subtracting our liabilities.

“In addition, you will pay more for your common shares than the amounts paid by our existing shareholders.”

According to regulatory filings the historical net tangible book value of Tankships was $351.2m as of 30 September 2014. At that same point in time it said indebtedness stood at $277.5m.

Timing is everything

While the company’s IPO has captivated the masses advocates are quick to point out that Economou has been planning to spin-off some of DryShips’ tankers for some time.

Critics see Tankships as what one described as “another cash cow” for Economou but some his fans, when asked if they agreed with this statement, argued that the listing will benefit DryShips and its investors.

As the parent of a subsidiary that owns the IPO hopeful’s shares they believe the float is an effective way of monetizing the Nasdaq-quoted operator’s exposure to the crude segment.

A handful of investors who frequent a DryShips chatboard hosted by Yahoo Finance agree with this, others think it would make more sense to hold on to tonnage bequeathed to Tankships.

Several said they will be sad to see the tankers go since the forecast for the dry-bulk market is looking increasingly grim and freight rates for crude carriers are on the rise.

At a glance the initial reaction to Tankships’ pursuit of a Times Square listing appears to be lukewarm but observers on both sides of the debate agree that the timing of the endeavour makes sense.

“The success of Euronav’s offering, which was oversubscribed, coupled with the encouraging outlook for the tanker sector, there’s no question that the timing makes sense,” said one observer.

“It’ll be interesting to see how the market responds, however,” he continued. “I think this is less of a question about Wall Street’s appetite for tanker exposure, which seems to be increasingly big, and more a question about whether investors trust Economou.”

Another contact with ties to the US capital markets argued that, regardless of what people think about Economou, the mogul has had a great deal of success in raising money on Wall Street and boasts an impressive empire.

“Some people love Economou, some don’t, but what is undeniable is that the guy has a knack for raising cash, a fact that Tankships identifies as a ‘competitive strength’ in its prospectus,” he continued.

“Regardless of what you think of the guy it’s important to note that he has been able to keep DryShips afloat.

"Last time I checked the stock was around a buck but he kept DRYS alive during a time that a number of peers left investors holding the bag by filing for bankruptcy.”

You read the most recent edition of Tankships’ IPO prospectus in full by clicking on the link located under the Related Media section to the right of this article

source:www.tradewindsnews.com