Investing, Trading, or Gambling?
Is the role of a public shipping company to compound value over time, or to simply serve as a trading vehicle for investors looking to opportunistically play the industry’s infamous cycles?
It’s a long-running, nagging question for public shipping executives and investors alike—and one that hung heavily in the air at the Marine Money conference in London earlier this year.
Jeffrey Pribor, CFO of International Seaways, offered a refreshingly blunt assessment:
“I’m just a blackjack dealer in the casino. If the market is the casino, whether [investors are] going to invest or not, they’re going to put it on black or red, but that’s hedge fund A buying from mutual fund B… and the money doesn’t go to me because my valuation stinks.”
Pribor’s quote speaks volumes about the current state of public shipping. Liquidity may be sufficient for short-term traders to come and go, but there's little appetite for primary transactions, i.e. when companies raise money directly from investors. IPOs remain rare, and even follow-on offerings for existing platforms often struggle to gain traction.
Today there is a structural mismatch in public shipping: companies seeking long-term capital to grow or renew fleets are being valued—and traded—by investors with short-term horizons.
The outcome? Depressed valuations, persistent discounts to NAV, and a limited ability to raise equity without significant dilution. Hardly the ideal setup for durable value creation. Still, savvy traders can double their money on these stocks if they time the cycles right.
A possible solution is for ship finance stakeholders to embrace reality: public shipping companies are running the casino, not playing in it.
Let short-term investors place their bets, let management teams (and their bankers) take their cut of the action, and move on. For those seeking true long-term exposure to shipping, the better path may lie outside of the public markets altogether. Ships trade hands daily. The only real barrier to entry isn’t complexity—it’s capital.
