DryShips Inc.: Reverse Split Selling Is Not Over Yet

| About: DryShips Inc. (DRYS)

Summary

During the last three reverse stock splits, DryShips stock price dropped between 21% and 33% the date the reverse split became effective.

The effective date of the current reverse stock split is tomorrow July 21st so selling is likely to continue.

Selling pressure during Monday's has been the norm during the issuance of stock through Kalani.

DryShips Inc (DRYS) announced a 1 for 7 reverse stock split on July 18th. The effective date of the reverse stock split is today, July 21st. The following table illustrates the stock price performance during the last three stock reverse stock splits that DRYS announced and executed during April, May, and June. Although there is no guarantee that the pattern of large sell-offs during the effective date will recur July 21st, there is definitely a pattern of continued selling on the effective date.

DryShips Inc
Post Split Stock Performance
Stock Price
Announcement Date Effective Date Ratio Ann. Date Eff. Date - 1 Eff. Date Eff. Date + 1 Eff. Date + 2
June 19th June 22nd 1 for 5 5.95 4.25 2.83 2.44 2.34
May 2nd May 11th 1 for 7 37.10 33.60 26.65 25.35 22.25
April 6th April 11th 1 for 4 144.20 86.80 60.90 75.85 70.34
Percentage Change From Announcement Date
June 19th June 22nd 1 for 5 -29% -52% -59% -61%
May 2nd May 11th 1 for 7 -9% -28% -32% -40%
April 6th April 11th 1 for 4 -40% -58% -47% -51%
Percentage Change From Effective Date Minus 1
June 19th June 22nd 1 for 5 -33% -43% -45%
May 2nd May 11th 1 for 7 -21% -25% -34%
April 6th April 11th 1 for 4 -30% -13% -19%

For all three reverse stock splits during April, May, and June, DRYS stock price experienced significant declines between 21% and 33% during the effective date. During April, DRYS stock price recouped half of its effective date loss on the following day (Plus 1). During May and June, the selling continued on the effective date plus 1 but at a much diminished rate.

For the current reverse stock split, the effective date plus 1 is a Monday. During the course of the issuance of equity through Kalani, Mondays have typically experienced selling pressure as stock was dumped into the market, so, short-term, DRYS may be looking at a couple of rough days. The following table contains a small sample but it illustrates the point.

Monday Selling Pressure % Declines
July 17th -7.3%
July 10th -12.8%
July 3rd -18.9%
June 26th -4.3%
June 19th -32.0%

That does not mean that there will not be bounces on any particular day. DRYS experienced an almost 30% bounce intraday on July 20th between 9:50 am and 11:30 am as a fair amount of short covering volume hit the market. 11:30 saw the peak and the stock retraced the entire intraday gain and closed at $.43, close to the low for the day.

Conclusion

DRYS' stock price will continue to be under severe pressure due to the reverse stock split and expected continued stock issuance over the next 8 to 10 weeks. Given management's prior history and the recent one a month pace, this will likely not be the last reverse split. Until management stops issuing stock, there will be no sustainable bottom.

Disclosure: I/we 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.

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