Investors Should Steer Clear Of Stalwart Tankers IPO

| About: Stalwart Tankers (STST)


STST is a Greece based firm that was recently formed to own and operate mid-size stainless steel chemical tankers.

STST plans to raise $150 million in its upcoming IPO, aiming for a market value of $188 million, with a target price of $11-$13 per share.

Given STST’s reliance on the uncertain recovery of the shipping market, and lack of operating history, we suggest investors steer away from this IPO.

Stalwart Tankers Inc. (Pending:STST), a firm recently formed to own and operate mid-size stainless steel chemical tankers, plans to raise $150 million in its upcoming IPO.

The Athens, Greece-based firm will offer 12.5 million shares at an expected price range of $11-$13 per share. If the IPO can reach the midpoint of that range at $12 per share, STST will command a market value of $188 million.

STST filed on February 14, 2014.

Lead Underwriters: Global Hunter Securities LLC, Jefferies LLC, Wells Fargo Securities LLC

Underwriters: Pareto Securities AS, UniCredit Capital Markets LLC

Overview of STST

STST is an owner and operator of mid-size stainless steel chemical tankers, providing transportation services for chemical and oil operations. The firm's tankers carry a wide array of liquid chemicals, including edible commodities, petroleum, and more volatile compounds.

STST was recently formed, and its initial fleet will consist of five stainless steel tankers. The firm has scheduled production of an additional 4-6 tankers from a Korean Shipyard, and is looking to purchase multiple secondhand tankers from third parties.

STST plans to charter its tankers to relatively short-term charters while the freight market remains weak, hoping to position itself to take advantage of any market recovery.


STST offers the following figures in its F-1 balance sheet for the year ended December 31, 2013:

Revenue: $25,776,368.00

Net Loss: ($134,916.00)

Total Assets: $63,720,015.00

Total Liabilities: $34,422,907.00

Stockholders' Equity: $28,297,108.00

Banking on a Shipping Recovery

STST was formed in an extremely weak marine shipping market in order to secure low prices for its initial fleet. The firm is essentially betting on a recovery in the shipping cycle in order to capitalize on its initial purchases.

STST faces a competitive, highly fragmented market for charters for its tankers. Its competitors, many of which have greater financial resources than STST, include other private owners as well as state-owned tankers.

Management Overview

CEO Dimitrios J. Souravlas has over 25 years of experience in the shipping industry. He co-founded and serves as President of Blue Sea Shipping Monaco, and served as CEO of Elmira Tankers Management S.A. Mr. Souravlas holds a Bachelors degree in Mechanical Engineering from the University of Sunderland and a Masters degree in Automation Technology from the University of Loughborough.

Investors Should Avoid STST IPO

We plan to avoid this IPO.

STST is heavily reliant on its forecast of an improved market for its tankers' charters, which has yet to materialize.

The firm's lack of operating history is somewhat concerning, given that it intends to enter a market that places emphasis on the reputation and reliability of tanker owners.

STST's lack of major bracket underwriters also gives us pause.

Though STST may pay off in the long term, we suspect that investors won't want to wait on a shipping recovery at the time of the IPO.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.