So I woke up today to see the overall dry shipping market up, and GNK down 4 points in pre-market. WTF?!

Checking into it I see that they issued a press release stating they are going to issue up to 6.5 million new shares on the market to raise funds to pay down debt.  OK that explains the tank job on an up day, now let's dig into this:

As I write this post, GNK is down $1.75 or about 2%.  

GNK floated about 29 million shares before this announcement.  Post secondary offering, assuming they sell all 6.5m shares, we're looking at new float of 35.5m shares.

In short - GNK just diluted shareholders about 20%.  A dilution in and of itself is not a horrific event, as long as the funds are used to increase revenue and EPS keep in line.  Given that the stock is only down 2% at the writing of this is telling us that the general market feels that almost dollar for dollar the proceed used will be directly reflected in earnings.

I have gotten burned BAD with secondary offerings in the past, and the market action today on GNK is the absolute opposite of what I've seen before.  The market reaction is actually outright bullish.  GNK issued a massive amount of stock (20% of float) and their stock is down much less than I would expect (without any expectations of increased EPS - GNK should be down 20% immediately due to dilution).

Don't start labeling me as a GNK homer, I actually was about to pull the emotional sell trigger when I saw the Secondary Offering PR.  I just held back a second to do a little digging before I sold. 

Happy trading!

* UPDATE * GNK closed today down $5.00 (5.95%).  The market in all sold off thru the day.  I ususally use DRYS as a yardstick on performance for GNK - DRYS actually sold off harder than GNK today - relatively speaking.  When I posted this originally and GNK was -2%, drys was +2%.  GNK ended the day -6%, DRYS ended the day -5.15%.In comparison, DSX was down 2.41% today and EXM was down 6.95%.   Today was a stinger, but with the highs come the lows.  I still like this play for a 12 month timeframe.  

* UPDATE 2 * GNK also announced it signed a Panamax Charter today for $55,000 / day with ArcelorMittal.  This represents almost a 100% fee increase over it's other near term expiring Panamax charters!  Great news, if Genco can lock in a few more multi year deals at 75 - 100% revenue growth in the next 12 months.  See here for ship charter information (scroll to bottom).