SHIP - Seanergy Maritime Holdings: Costamare CEO Surprisingly Discloses 5.1% Stake - Buy

2023-07-06 07:42:18 ET

Summary

• In late May, shares of Greece-based Capesize pure play Seanergy Maritime Holdings sold off to new all-time lows after the company reported seasonally weak first-quarter results.
• Since that time, Capesize charter rates have moved even lower but Seanergy's common shares have rallied approximately 20% over the past couple of weeks.
• After the close of Wednesday's session, an entity affiliated with Costamare Inc.'s Chairman and CEO Konstantinos V. Konstantakopoulos disclosed a new 5.1% stake in the company.
• Despite a strategic transaction appearing unlikely at this point, Mr. Konstantakopoulos' move might attract other shipowners to Seanergy Maritime's common shares, similar to Danaos Corporation's recent investment in Eagle Bulk Shipping.
• While the discount to net asset value has narrowed in recent weeks, I am keeping my "Speculative Buy" rating on the shares based on the potential for further accumulation by Mr. Konstantakopoulos and the likelihood of other shipowners joining him.

Note:

I have previously covered Seanergy Maritime Holdings ( SHIP ), so investors should view this as an update to my earlier articles on the company.

In late May, shares of Greece-based Capesize pure play Seanergy Maritime Holdings ("Seanergy" or "Seanergy Maritime") sold off to new all-time lows after the company reported seasonally weak first quarter results.

Shortly before the report, the Board of Directors awarded an aggregate 1.8 million shares under the company's equity incentive plan according to disclosures provided in the annual report on Form 20-F with Chairman and Chief Executive Officer Stamatis Tsantanis being the prime beneficiary.

Based on renewed weakness in dry bulk charter rates and corporate governance concerns related to the above-discussed share awards, I decided to downgrade shares from " Strong Buy " to " Speculative Buy ".

Since that time, Capesize charter rates have moved even lower but Seanergy's common shares have rallied approximately 20% over the past couple of weeks:

During Wednesday's session, the stock price briefly crossed the $5 mark before ending the session at $4.90.

After the close, investors were provided the reason for the recent surprise rally as an entity affiliated with Costamare Inc.'s ( CMRE ) Chairman and CEO Konstantinos V. Konstantakopoulos disclosed a new 5.1% stake in Seanergy Maritime.

Please note that in contrast to Danaos Corporation's ( DAC ) recent investment in Eagle Bulk Shipping ( EGLE ), Mr. Konstantakopoulos accumulation of shares in Seanergy Maritime represents a private endeavor, at least for now.

In fact, this is not the first time that Mr. Konstantakopoulos has invested some of his private funds in fellow Greek shippers.

Eighteen months ago, he accumulated a 10.5% stake in tanker operator Tsakos Energy Navigation, Ltd. ( TNP ) which he subsequently sold at a massive gain.

That said, Mr. Konstantakopoulos' investment in Seanergy Maritime seems to fit well with Costamare's recent move into dry bulk shipping. Just two weeks ago, Costamare was reported to have acquired its first Capesize vessel.

As of March 21, Costamare owned a fleet of 45 dry bulk vessels with a focus on the smaller, geared vessel classes:

In addition, the company recently established a new dry bulk operating platform with $200 million in committed capital:

New York-listed Greek owner Costamare has bolstered its dry bulk operating platform, Costamare Bulkers Inc. ("CBI"), taking its fleet over the 50-ship mark since last November.

Established to charter in and out bulkers, enter into contracts of affreightment and utilise hedging solutions, CBI has since February, when the owner of 114 vessels announced its Q4 2022 earnings, expanded its chartered-in fleet from 23 to 51 ships.

Backed by an investment commitment of up to $200m, of which some $150m has already been used, CBI has fixed a fleet of 31 newcastlemax/capesize vessels, 19 kamsarmax/panamax vessels and one ultramax, with 39 delivered, and the majority on index-linked charter-in agreements. The new venture has a global footprint through offices in Athens and Monaco and agencies in Copenhagen, Hamburg and Singapore.

Despite Mr. Konstantakopoulos' intentions regarding his newly disclosed stake in Seanergy Maritime remaining unclear at this point, it should be noted that the company remains controlled by CEO and Chairman Stamatis Tsantanis via supervoting Series B Preferred Stock as outlined in Seanergy's annual report on form 20-F:

While our common shares have one vote per share, each of our 20,000 Series B Preferred Shares presently outstanding has 25,000 votes per share; however, the voting power of the Series B Preferred Shares is limited such that no holder of Series B Preferred Shares may exercise voting rights pursuant to any Series B Preferred Shares that would result in the total number of votes a holder is entitled to vote on any matter submitted to a vote of shareholders of the Company to exceed 49.99% of the total number of votes eligible to be cast on such matter. (...)

As of the date of this annual report, our Chairman and Chief Executive Officer can therefore control 49.99% of the voting power of our outstanding capital stock. Our Chairman and Chief Executive Officer will have substantial control and influence over our management and affairs and over matters requiring shareholder approval, including the election of directors and significant corporate transactions, even though he owns significantly less than 50% of the Company economically.

The superior voting rights of our Series B Preferred Shares may limit our common shareholders' ability to influence corporate matters. The interests of the holder of the Series B Preferred Shares may conflict with the interests of our common shareholders, and as a result, the holders of our capital stock may approve actions that our common shareholders do not view as beneficial. Any such conflicts of interest could adversely affect our business, financial condition and results of operations, and the trading price of our common shares.

While voting power of the Series B Preferred Shares is limited to 49.99%, Mr. Tsantanis also holds a sufficient number of common shares to ensure full control of Seanergy Maritime.

Given this issue, any sort of strategic transaction appears unlikely at this point but similar to Danaos Corporation's recent investment in Eagle Bulk Shipping, Mr. Konstantakopoulos' latest move might very well attract other shipowners to Seanergy Maritime's common shares.

Even after the recent 20% rally, shares are still changing hands at a steep discount to net asset value ("NAV"):

That said, peer Safe Bulkers ( SB ) is currently changing hands at a similar discount to NAV despite its substantially higher dividend yield and lesser extent of corporate governance concerns.

Bottom Line

Apparently, accumulation by Costamare's CEO and Chairman Konstantinos V. Konstantakopoulos has been the reason behind the recent recovery rally in Seanergy Maritime Holding's common shares.

Despite a strategic transaction appearing unlikely at this point, Mr. Konstantakopoulos' move might attract other shipowners to Seanergy Maritime's common shares, similar to Danaos Corporation's recent investment in Eagle Bulk Shipping.

While discount to net asset value has narrowed in recent weeks, I am keeping my "Speculative Buy" rating on the shares based on the potential for further accumulation by Mr. Konstantakopoulos and the likelihood of other shipowners joining him.

Investors looking for alternative opportunities in the dry bulk space trading at similarly discounted valuations should consider an investment in Safe Bulkers.

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