To note: I covered Globus Maritime (NASDAQ: GLBS) previously, so investors should consider this as an update to my previous articles on the society.
Earlier this month, the small Greek dry bulk shipping company Globus Maritime filed its annual report on Form 20-F with the SEC.
As I expected, the company had a very strong second half of 2021 with decent cash generation. As a result, the estimated net asset value per share has increased by approximately 10% since my last update seven months ago:
The company’s balance sheet remains in very good condition with plenty of cash and net cash of $13.4 million.
As small class vessel rates held up well during the seasonally weak first quarter, I expect Globus Maritime to have generated an additional $5-10 million in free cash flow for the first quarter. Based on the rates currently available in the Forward Freight Agreement (“FFA”) market, the second and third quarters could see similar results, but it is too early to make an accurate prediction at this stage.
The company continues to operate its vessels on short to medium term charters with durations currently between one and ten months:
Assuming Globus Maritime does not raise additional equity, I estimate the company’s net asset value per share will rise to over $11 by year end.
With shares trading at a nearly 80% discount to net asset value, one would expect the company to buy back shares in hand, but with management and directors in total holding a paltry 3, 8% of common stock outstanding, interest isn’t really aligned here, which could also be why Globus Maritime doesn’t pay a dividend like most of its peers.
In fact, the CEO currently pulls around $2 million in cash from the company on an annual basis through a consultancy contract and massive bonus payments.
In addition, Globus Maritime has a history of diluting common stockholders.
In total, the company raised $108.3 million in gross proceeds from four direct deals registered between December 2020 and June 2021.
Since the company’s 1:100 reverse stock split eighteen months ago, common shares outstanding have increased by more than 10,000% to approximately 20.6 million.
The offerings also included a slew of warrant sweeteners that could further dilute common stockholders.
Management has used the funds to expand the company’s fleet from five to nine vessels over the past two quarters:
While I don’t expect Globus Maritime to raise additional equity anytime soon, the company’s blemished history will likely prevent the large discount to NAV from shrinking without a major catalyst. does not evolve.
Like the rest of the industry, Globus Maritime ended 2021 on a high note. Additionally, the company’s vessel rates held up well during the seasonally weak first quarter, which bodes well for additional cash generation this year.
At this point, I expect the net asset value per share to exceed $11 by the end of the year.
Unfortunately, the company’s history of outsized dilution and no dividend is likely to keep investors away despite the stock’s obvious value.
Given these issues, only the most speculative investors should consider an investment in Globus Maritime at this stage.