Smart money and shipping

Smart money and shipping

Making his Splash debut today is the scurrilous Mr Prospector, who mulls making a dry bulk investment against the better judgement of his increasingly distant pension fund manager.

I don’t know about you, but I’ve been getting increasingly excited about a story gathering momentum in the press over the past month or so. It is turning into a crescendo which will undoubtedly result in me investing a part of the Prospector fortune on a shipping stock with a ‘hugely compelling story’. That’s right, Polaris Shipping of South Korea. I love a good IPO story, don’t you? You can imagine the fascinating conversations between bankers, shipping company professionals and analysts as they review all of the previous bullshit stories, test which seems likely to have been forgotten and cook the numbers and analysis to try to make it look like facts. Then it’s off to a America like Feivel the Russian Mouse to meet the ‘smart money’ or, in this case, Oslo for the . . . um . . . shipping money?

Polaris’s management and investment banking team have obviously been paying attention in the lead up to the float. They noted carefully that John Michael Radziwill’s GoodBulk went for specific ship type (capesize), modern tonnage and a focused and transparent strategy from an experienced management team. It failed. What didn’t investors like about it? Probably the dreadful name, which was likely the biggest factor in sinking Hunter as well, named after a rubber boot warn by posh people while walking their fat Labradors. Then again, it could be that there was absolutely no discernible earnings record. Or that it is shipping, which you will see clearly, isn’t exactly interesting.

But that has never put me off in the past. I recently had lunch with my pension fund manager. Over the years lunch has been downgraded from three courses and a double portion of wine to a bacon roll in Bert’s Café on Old Kent Road, such is my wealth these days. He showed me some graphs and I showed him some back. His first was the performance of Genco since listing. I showed him the radioactivity count in Chernobyl over the same period. As you can see, it took longer for Chernobyl to return to close to normal than John Wobensmith – the self-styled consolidator of dry bulk shipping – to completely destroy my investment. It is always so exciting to hear his views on the future markets with insight that delivers a track record like this. Shipping has treated shipping company management well, that’s for sure. For the investors, well it’s tough love time for sure.

Next he showed me the performance of my Scorpio investment. I showed him a diagram of a ski jump. He showed me my Seanergy share performance. I showed him the glide distance chart of a Cessna with no engine. Lastly he showed me how my recent Grindrod Shipping investment had done, so I reversed the profile of Stage 12 of a recent Tour de France. We both noted that the Tour de France profile did at least go up a bit somewhere in the middle. Grindrod, well, not so much.

 

 

So you can imagine my excitement for the Polaris IPO. Take money, buy shares, lose money. Nobody liked the GoodBulk story, so fortunately Polaris is going for old ships, a mixed fleet and opaque strategy in a country with an established track record of blowing up their shipping businesses at regular intervals. Polaris even tragically lost one of its ships, but still thinks that it has a shot at getting some money out of investors.

It has other companies to run the gauntlet for it though. Scorpio – modern ships, big fleet, no cash, hopeless performance. Seanergy – focus, small is beautiful, Greek, hopeless performance. Grindrod, I can’t even remember the strategy, but it was at least consistent by delivering, you guessed it, a hopeless performance. I haven’t even bothered to title the graphs. You work it out if you care.

It used to be the case that equity investors bought a share in the earnings proportionate to the number of shares they bought. That is no longer the case. You buy shares with no realistic way of knowing if you will share in the earnings, but a very real requirement to have to find somebody that wants to take on your guess that ‘values’ will go up. Now looking at these examples (feel free to add your own – it is pretty much every listed shipping company in the bulk sectors), how do you feel that Polaris is going to go?

One thing that my pension fund manager told me over our cold stewed tea was that if I put my money into any more shipping company investments that I should consider myself about as far from ‘smart’ money as I am from singing at the Sydney Opera House. And I am reliably informed that I couldn’t hold a tune in a bucket.

Not come across Mr Prospector before? Here’s a recent selection of Twitter highlights from shipping’s most opinionated man.

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2 Comments

  1. Avatar
    Freightboy1
    March 5, 2019 at 9:58 pm

    Good stuff- keep these articles coming! From your buddy freightboy1

  2. Avatar
    Tony Fordyce
    March 6, 2019 at 4:02 pm

    That’s a bit unfair! I seem to recall hearing of a guy called Mr. Economy (or something like that), who seems to have made a bit of money out of shipping shares, or was it making money out of shipping share owners? I can’t quite remember.