Seaspan Shares Soared: What You Need to Know
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Seaspan (NYS: SSW) surged more than 33% in early trading after the shipping services firm announced a plan to repurchase up to 10 million shares at $15 apiece, a 43% premium over yesterday's close.
So what: Management aims to restore confidence following a sharp sell-off in shares of not just Seaspan but a variety of shipping stocks, including DryShips (NAS: DRYS) , Eagle Bulk Shipping (NAS: EGLE) , and Paragon Shipping (NAS: PRGN) . The difference, analysts say, is that most Seaspan clients are locked into long-term contracts. Guaranteed work protects against the oversupply and rate volatility issues that plague the rest of the industry at the moment.
Now what: Yet spending $150 million to repurchase shares at a premium might be overdoing it. After all, if the shares are cheap, wouldn't management create more value for shareholders by purchasing at a discount or increasing the dividend? Let me know what you think using the comments box below.
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At the time this article was published Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.The Motley Fool owns shares of Seaspan. Motley Fool newsletter services have recommended creating a write covered straddle position in Seaspan. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.