US Post-election Shipping Rally Raises Interest, Questions

Shares of U.S. shipping companies shot higher again on Wednesday, causing volatility halts in a number of stocks and raising questions among investors and analysts over the extent of their sharp post-election rally.

 

The jump in share prices and unusually heavy trading volume even surprised analysts who follow the stocks, although some said the gains appeared to result in part from optimism that commodity demand would increase under President-elect Donald Trump.

 

At the center of the rally has been DryShips Inc, an $82.9 million market-capitalization company that has been halted for volatility in recent sessions and is up about 1,500 percent since its close on the Nov. 8 Election Day.

 

The stock was halted again on Wednesday, and Nasdaq requested additional information from the company.

 

Shares of Diana Containerships Inc, Globus Maritime Ltd and Pangaea Logistics Sol Ltd also were halted multiple times for volatility.

 

A stock's outsized move in a short time triggers a volatility halt. To keep the price within a specified band, the stock is halted for a set period, usually a few minutes, before trading resumes.

 

Globus Maritime was last up 161 percent, while Diana Containerships gained 172 percent, both in heavy volume, while Pangaea shares were up 17.5 percent. Among other companies, Safe Bulkers Inc was up 24.2 percent, while Seanergy Maritime Holdings Corp rose 46.8 percent.

 

A spokeswoman from the U.S. Securities and Exchange Commission declined to comment, while a spokesman from Financial Industry Regulatory Authority had no immediate comment.

 

Trump, a Republican, has pushed for more infrastructure spending and promised to help the U.S. coal industry.

 

"The bigger bull-case scenario is that demand is actually improved, as indicated by the resurgence in commodity prices," said Stifel Financial Corp Director Benjamin Nolan, who covers maritime sectors.

 

But "these are pretty astounding moves," he said. "There may be a number of factors, but any one of them, you wouldn't imagine it would have this kind of impact, and it shouldn't extend itself to all sectors" of the shipping universe.

 

The industry has been struggling with global overcapacity and sluggish trade. In the most visible sign of weakness, South Korea's Hanjin Shipping Co Ltd filed for bankruptcy earlier this year. Its collapse led ports around the world to deny service to its ships as vendors refused to unload cargo for fear they would not be paid.

 

Shipping stocks' recent meteoric rise has attracted more interest from short sellers. The shares are more expensive to borrow as well, at 55.85 percent for DryShips, up 36.7 percentage points from Monday's close, for example.

 

Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey, said the rally concerned him.

 

"It's going on for days," he said. "If there is something illegal going on here, where are the regulators?"

 

Saluzzi said some of the extreme trading was probably exacerbated by the fact that many of these companies do not have a big supply of shares.

 

DryShips, for instance, has a free float of 1.06 million shares. On Tuesday, trades totaled 10 million.

 

Diana, which has a float of 5.77 million shares, already had 10.6 million traded before midday on Wednesday, compared with 4.8 million on Tuesday.


(By Caroline Valetkevitch; Additional reporting by Sinead Carew and Chuck Mikolajczak; Editing by Lisa Von Ahn)