by Captain John Konrad (gCaptain) In May 2020 I wrote an article sharing the fact that Transocean ($RIG) was the biggest loser stock of the last decade. At the time the market value of the company was less than the replacement cost of one new drillship, a full 95.1 percent loss over the last eleven years. But times have quickly changed. According to finviz, Transocean shares rose 362% in the last quarter. Its market value is now above $2 billion!
Yesterday was Transocean’s biggest day as it got swept up in a rising tide of heavily shorted stocks like GameStop ($GME), Blackberry ($BB), Nokia ($NOK), Koss ($KOSS), and AMC. At one point in the day, shares were up over 50% and were featured on CNBC.
Related Book: Exit Strategy: A Robert Fairchild Novel by Matthew McCleery
But why? Over the past week, wall street was shocked as GameStop stock rose to unthinkable levels. Even Elon Musk, the White House, and AOC are tweeting and commenting about it. Elon had the most impact as he pointed his 43 million followers to a link of the Reddit community investing in GameStop, called r/WallStreetBets.
By the close of regular trading Wednesday afternoon, the stock was $347.51 per share, up from historic lows of around $3.30 per share in the summer of 2019. And then in after-hours trading, it dropped more than 37%, only to rise again.
The reason wallstreetbets has focused on Gamestop and long-forgotten companies like Nokia is that these companies have been heavily shorted by wall street hedge funds. Basically, these funds have poured billions of dollars on short positions betting on the hope that these companies would go bankrupt. WallSteetBets members, took offense to hedge funds helping to bankrupt beloved companies of their youth. They purchased millions of shares, forcing big wall street managers to “cover” their positions. In doing so billions of dollars have transferred from hedge funds to the accounts of millions of small retail investors.
But what about shipping ‘stonks’? According to a popular Wallstreetbets sentiment tracker, the cruise lines (especially Carnival $CCL) are minority favorites on Reddit but no shipping company is among the most popular stocks listed.
So while Transocean is not a stonk favorite, investors are attacking all stocks with heavy short interest and, as of yesterday, over 17% of Transocean shares have a short interest. This number is tiny compared to 121.98% of the shares of Gamestop which are currently shorted, but is enough to send the value of the company soaring.
Is Transocean Alone?
Some have pointed to the fact that other shipping companies have experienced meteoric rises in recent months. In November the young and brilliant shipping analyst J Mintzmyer tweeted buy signals for several container shipping companies leading me to write a forum post titled “Please talk me out of buying ship stocks like $DAC”.
Since then shares of Danaos have risen from $10.80 to a high last week of $33. DAC’s one-year performance is an astonishing 271.58%. But Transocean is not DAC. While the price of oil has increased, the fundamentals, the leadership, and the opportunities for Transocean have not changed significantly in years.
What happens next?
While most professional advisers suggest the current value of RIG and GME are unsustainable, the fact is that the recent surge could provide a lifeline to troubled companies.
Many companies,that have seen a surge of retail interest (like $AMC and Plug Power $PLUG) have announced share offerings. An offering is the issue or sale of a security by a company. It is often used in reference to an initial public offering but can also be announced by a mature company like Transocean to raise money directly from investors.
This money can provide companies with an opportunity to pivot. In Gamestop’s case, part of the surge has been due to the fact that it’s the biggest critic Ryan Cohen – the founder of Chewy, a highly popular online pet company – pushed out leaders unwilling to change, joined the board, and has promised to help pivot the company from a boring brick and mortar company to a leading online retailer.
While the fundamentals are poor for Gamestop and do not justify current high levels, new leadership is working to improve those fundamentals. Transocean leadership is not.
For years gamestop executives looked at online competitors with contempt and dug their heels in preventing change. The future for gaming is online and Cohen’s realization of that and his willingness to embrace the company’s biggest critics is the driving force behind the company’s surge – a surge that will flood the company with cash and facilitate change.
In a similar vein, the future of the energy industry is clear – facilitating offshore clean energy – but it’s CEO, Jeremy D. Thigpen, is wholly unqualified and is the person who navigated the company into the last decade’s historic losses. Even more concerning is the fact that Thigpen has shown little interest in pivoting the company towards clean energy. This is despite the fact that all his customers (and regulators) are moving away from oil drilling.
Today presents a unique and (possibly) short lived opportunity for Transocean to higher new board members who can help the company pivot, issue shares at today’s high valuations, and use the cash to pivot the company to MEET THE CUSTOMERS NEEDS.
Who can help the company pivot? Well, there wasn’t anyone more critical to Gamestop than its most vocal stockholder Ryan Cohen and I can’t think of anyone more critical of Transocean than its stockholder yours truly.
So Jeremy give me a call about that board seat. Or not. Just let me know soon so I can either sell your stock or buy lots more. If I am too controversial, there are others who can help like Davos LSE Ocean Finance chairman Nishan Degenerain or successful ocean entrepreneur Liz Taylor, or eco-venture capitalist Marina Hadjipateras, or eco-entrepreneur Matt Heider, or short sea shipping guru Antoon Van Coillie or MIT startup founder Mohamed Saad Ibn Seddik or MIT Alumni and Marsoft President Arlie Sterling or Exit Strategy Author Matt McCleery to name just a few outspoken individuals who “get it” and have been banging their head against our slow-moving industry for years.
And if Jeremy doesn’t call, if they continue to have mostly white male and highly noncontroversial board members – rather than the Team Of Rivals that Lincoln proved was the path to success over a century ago – hopefully other high flyers like Matson, Danaos, or Maersk will?
I will stand by the phone but will not hold my breath.
What’s the ‘next” GME or RIG?
The stock market is impossible to predict but with so many great shipping companies at historically low levels it seems certain that some of them (likely the ones who hire leaders and board members who are argumentative like Cohen and can help pivot towards technology and green energy) will take off soon. It’s unlikely that gCaptain will focus on these issues but our friend J Mintzmyer likely will. Follow him on twitter to learn more.
Related Book: Exit Strategy: A Robert Fairchild Novel by Matthew McCleery
In full disclosure, I own shares or options in most of these stocks listed in this article including GameStop and Transocean. I am not a financial analyst, don’t listen to my stock advice. -JK
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