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Shares of dry bulk shipper Eagle Bulk Shipping Inc (NASDAQ:EGLE) are up sharply Tuesday without any real news.

EGLE Chart
(Click to enlarge)

EGLE data by YCharts

Broad Market Rally

One reason why EGLE is moving higher is the rally in the broad market indices. EGLE has a high beta of 2.2, so the stock is probably benefiting from the move higher in the Dow and S&P 500.

Sector Rally

The dry bulk shipping sector in general is having a very good day Tuesday, this is likely helping EGLE. As shown by the chart below, other shipping stocks such as Dryships Inc (NASDAQ:DRYS), Genco Shipping (GNK), and Navios Maritime (NYSE:NM) are all trading higher. However, EGLE is outperforming these stocks significantly.

EGLE Chart
(Click to enlarge)

EGLE data by YCharts

Short Covering

One possible explanation for the move in EGLE is short covering. Short interest currently stands at roughly 2.5 million shares or 16.2% of the float. It is possible that some shorts have decided to lock in profits on their EGLE short as the stock is close to a 52-week low.

Debt

The reason why the short interest is so high in EGLE is because investors do not believe the company will be able to survive the current downtrend. EGLE has debt of $1.14 billion and equity of just $50 million. If dry bulk rates to not improve soon, I believe the company will be in a difficult situation.

Credit Facility Extension

Recently, EGLE announced that it was allowed to extend its restrictive covenants linked to credit facilities until June 20. The move today suggest that investors believe EGLE will be able to meet its obligations for now.

My Take

My view on EGLE remains unchanged from my last comment. I would use the rally in EGLE to sell. I agree with the negative thesis on EGLE outlined by a fellow SA contributor here.

Source: Eagle Bulk Shipping: Sell The Rally