Dribbling Dilution

In a short commentary on DryShips, Scott Burk of Oppenheimer noted that the near-term upside, derived from the cash flow benefits of the newly announced Petrobras contract on the drilling rig Leiv Eriksson, would likely be dampened. He surmises that management would likely “…sell stock into strength from this announcement under its ATM offering.” What we found more sobering was Mr. Burk’s estimate that while this $500 million offering could be completed by mid-April, DryShips would likely need additional equity to comply with LTV covenants by August 2009. The analogy that comes to mind is the Chinese water torture

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