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DRYS: Shorts, Be Very Very Careful. Longs, Be Vigilant. Trade Smart.

|Includes: DryShips Inc. (DRYS)

The lastest DRYS drama is playing out.

- let's suppose that the Kalani purchases are happening now

- at 20 million shares, @ 3.1 so far, we will be at 1/3 done by the end of the day - say 25 million shares.

- that means 75 million added to the outstanding post raise

- or, roughly 112 million total.

- Marked shareholder equity will be around 380 million, or $3.4/share.

- give or take 10-20% either way.

- quite efficient actually.

If this holds - the cost to maintain a short position becomes challenging. The risk of a "rip your face off" short squeeze is increasing every hour that the ultimate share count looks contained at under 120 million shares. The only way to get the share count up and drive nav to under $3 is for the stock price to go down another at least another 50 cents.

This may not happen. The difference this time is that DRYS now has some decent assets and they are throwing off cash. Prior it had nothing - just garbage.

If it doesn't happen, i.e shares slaughtered further from here and traders feeding Kalani a good deal, then the reason to be short fades - and so does the ability to justify a short term short position.

The Fat Lady may just be getting ready back stage.

Disclosure: I am/we are long DRYS.