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Reverse Split Sinks DryShips Inc. (DRYS)

The volatility surrounding DryShips Inc. (NASDAQ:DRYS) continues. Shares of Dryships fell 19% in after-hours on Thursday after the drybulk shipper announced that its board has agreed to effect a 1-for-4 reverse stock split of common shares as of the opening of trading on April 11, 2017. When the reverse stock split is executed, every four shares of the company’s common stock will be automatically combined into one share of common stock. Shareholders who would otherwise hold a fractional share of DryShips common stock will receive a cash payment in lieu thereof at a price equal to that fraction to which the shareholder would otherwise be entitled multiplied by the closing price of DryShip’s common stock on the Nasdaq Capital Market on April 10, 2017. Many traders feel DryShips is reverse-splitting to stay listed on the NASDAQ, which has rules for stocks trading under $1 for a substantial period of time. Given that the stock will be higher nominally due to the reverse stock split, some traders could be selling due to the thinking that the stock would be easier to short. (Shorting in our opinion is a dangerous game no matter what, however).

What Does The Smart Money Sentiment Say?

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 39.7% gains over the past 12 months and outperformed the 24.1% gain enjoyed by the S&P 500 ETFs. Our enhanced small-cap hedge fund strategy returned more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points over the last 4.5 years (see details here).

None of the 742 elite funds that we track held any shares in DryShips Inc. (NASDAQ:DRYS) during the last 13F filing period.

The Bottom Line

DryShips Inc. (NASDAQ:DRYS) has fallen sharply in extended-market trading after the company’s board announced a reverse-stock split to occur before market open on April 11. For more reading, check out ‘11 Largest Container Shipping Companies in the World‘.

Disclosure:None

Sheila Fitzgerald/Shutterstock.com

Sheila Fitzgerald/Shutterstock.com