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Diana Shipping: Expect More Tender Offers And Buybacks

Aug. 22, 2019 1:01 PM ETDiana Shipping Inc. (DSX)11 Comments
Philip MacKellar profile picture
Philip MacKellar


  • Diana Shipping has completed four tender offers since late last year.
  • Older ships have been sold to fund the buyback.
  • The tender offers have not increased balance sheet leverage.
  • Tender offers with a fixed price and firm end date represent a shareholder-friendly buyback strategy as it reduces the odds of overpaying.
  • Investors should expect more ship sales and tenders in the future.


Diana Shipping Inc. (NYSE:DSX) is a dry bulk transportation company headquartered in Greece. As of June 2019, it operates a fleet of 45 ships which range in size from relatively small Panamax and Kamsarmax vessels to large Capesize and Newcastlemax ships.

Here at Contra the Heard Investment Letter, we own the company at an average price of $3.86. DSX caught our attention when the industry fell from darling to dog between 2012 and 2015. Unlike many of its peers, however, the entity had a relatively clean balance sheet, had engaged in low dilution over time, and had shorter depreciation assumptions. Insider ownership was also significant, and management structured the enterprise to generate more predictable revenue streams than many competitors. Instead of chartering vessels at spot market prices, charters are set at a fixed price. This means revenues are more stable; they are basically hedged for the duration of the time charter contract. In addition to using fixed price charters, contracts across the fleet are staggered over time to further smooth out the revenue.

Moreover, the executive team appeared to have a clear strategy for different market environments, whether good or bad. As a result, we bought the stock thinking that the combination of a (relatively) strong balance sheet, fixed-price time charter revenues, and a competent c-suite would result in solid returns when the sector recovered. Shipping has not yet recovered, but management’s adjustments to changing conditions continues to confirm our thesis and the new buyback exemplifies this point.

Diana’s Tender Offers:

Since the fourth quarter of 2018 the corporation has engaged in four tender offers:

Source: table was generated from the numbers in the press releases linked here:

  • December 31, 2018: DSX announced it had purchased 4.167 million shares at $3.60 for total proceeds of $15 million. Shareholders tendered 11.02 million meaning

This article was written by

Philip MacKellar profile picture
Philip MacKellar is an analyst, portfolio manager, and investor at Contra the Heard Investment Newsletter. He has been with the company since 2011 and has been investing since 2004. The newsletter’s primary focus is on contrarian and value-oriented investment opportunities traded in the United States and Canada. In addition, Philip sometimes engages in M&A, other special situations, and holds bonds, preferred shares, and convertible securities. Contra the Heard is a Toronto based company and was founded in 1995. Philip also blogs about personal finance topics on his own website called mymoneymoves.ca in his free time. You can also follow Philip at the Globe & Mail, on Twitter @Rallekcam, and catch him on YouTube at Contra the Heard.

Analyst’s Disclosure: I am/we are long DSX. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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