Wall Street is losing another big name in shipping, sparking the decades old debate on the merits of being listed.
New York-listed LNG carrier specialist owner GasLog announced Monday delisting plans, entering into a merger with BlackRock’s Global Energy & Power Infrastructure team. GasLog’s founder, Peter Livanos, said the new deal would allow “for access to growth capital currently absent in the public equity markets”.
The GasLog announcement marks the fifth shipping stock to exit Wall Street in the last 15 months.
GasLog’s take-private transaction has been done by an infrastructure fund.
Currently there is a lot of private equity money in infrastructure looking for a home, and a less volatile end-market with long-term contracts such as the LNG shipping sector meets a lot of their parameters.
Spot-exposed tanker, dry bulk, container names are much less likely to be targets and therefore are less likely to be offered this exit strategy.
The shipping markets and the capital markets are both very volatile and mostly are not in sync
Nevertheless, there are a host of listed names understood to be reevaluating their position on Wall Street.
“There has always been this tug-a-war between the costs and benefits of being a publicly traded company,” commented Randy Giveans, senior vice president, equity research at Jefferies.
Looking at GasLog specifically, Giveans said the company’s upcoming debt maturities and high leverage had made it difficult for them to access growth capital recently.
Veteran ship financier Dagfinn Lunde, the chairman of eShipfinance.com, told Splash Extra that as long as share values are so far below net asset values (NAV), a private investment will look more attractive.
“With the image of the shipping industry not being green enough, new money will be hard to find whether private or public,” Lunde cautioned.
On the GasLog news, Tobias Koenig, the founder of Lexington Maritime, said that going private made a lot of sense, at a time when public markets show very little interest in comparatively small cap shipping stocks.
“Most public shipping companies are trading well below NAV. This is a great opportunity for private capital investors to invest and create a much stronger business,” Koenig said.
“Few companies have traded at a premium to NAV for extended periods,” pointed out Philip Clausius, the managing partner at Transport Capital. The listed companies have however used the public markets effectively to raise so-called rescue capital, thereby avoiding bankruptcy, albeit typically at the cost of material dilution to existing shareholders, Clausius observed.
Morten Arntzen, the executive chairman of Team Tankers International, hit out at the many micro cap public shipping companies with no viable plans for growth.
“Most of these management teams should just monetise their fleets and return the cash to their shareholders and/or become smaller pieces of much bigger companies, but then management teams would lose their positions and lose their slots on the speakers circuit,” Arntzen said.
For these companies, Arntzen said going private to attract growth capital is not an option because private investors are sceptical about co-investing with management teams whose legacy is negative returns for shareholders.
Panos Patsadas, senior chartering manager at SIBUR International, said it was important shipping take heed of Livanos’s decision, and other big name Greeks before him.
“GasLog’s delisting, along with their commentary that capital has become more difficult to raise in the public markets should come as no surprise,” Patsadas said, adding: “George Economou, citing different reasons, did the same with DryShips over a year ago, and my approach has always been not to follow the headlines, but the people behind them.”
Livanos and Economou going private could be the beginning of a trend, Patsadas suggested.
Concluding, Lunde from eShipfinance.com said it was hard to argue with Peter Livanos.
“He has been right so many times before,” Lunde said, adding: “The debate – public versus private – will go on forever as both the shipping markets and the capital markets are both very volatile and mostly are not in sync.”