One of the hottest stocks on the market today, TOP SHIPS Inc (NASDAQ: TOPS) is making a dramatic run for the top. While the stock has gained by more than 20% on high volume, I wouldn’t want to be one that was fooled by today’s gains.
Sure, the growth had to do with a financing update that seems to align the interests of the company with the interests of investors. However, the history of the company’s actions with regard to financing along with issues associated with the provider of the new funding suggest that things aren’t quite as peachy as they appear.
TOPS Announces A Corporate Update
This morning, Top Ships announced a corporate update surrounding an ATM program and other financial transactions. Here’s what we saw:
With Regard To The ATM Program
Top Ships announced that it would be termingating its equity distribution agreement with Maxim Group LLC. This particular agreement is necessary for the company’s “at-the-market” equity offering program. Of course, the ATM program had the potential to lead to serious dilution. So, it makes sense that investors are excited about the news that the program has been terminated.
With Regard To The PUrchase Of Vessels
In the release, Top Ships also updated investors with regard to financing surrounding the purchase of new vessels. The company said that it is currently in discussions and has received indicative terms from financial institutions surrounding the financing of these new vessels. The vessels include the M/T’s Eco California, Eco Bel Air and Eco Beverly Hills.
All vessels that are part of this transaction are being delivered from Hyundai in South Korea and are considered to be high quality. As a result, TOPS said that the vessels are attractive options for financiers. At the moment, the hope is that the Eco California will be delivered in January, the Eco Bel Air will be delivered in April, and the Eco Beverly Hills will be delivered in May.
With Regard To The Family Trading Inc. Credit Facility And Financing News
Another big announcement made in the press release today is that TOPS said that it was close to finalizing an increase in the Family Trading Inc. credit facility. The company also said that it is in discussions with its existing senior lenders as well as other finance providers with the hopes of securing additional liquidity.
A Company With A Checkered Past And Worse Future
At the end of the day, there’s good reason that the news caused TOPS to climb today. However, when we dig in further, it’s clear to see that this is a very dangerous investment. The truth of the matter is that Top Ships has a history of bad financing and bad corporate moves that have led to dilution, reverse splits, and ultimately the gains of management at the cost of investor dollars. While the transactions mentioned above seem to align the company’s interests with investor interests, the truth of the matter is that this couldn’t be further from the case.
First and foremost, it’s important that you know what the Family Trading Inc. credit facility is. Ultimately, the credit facility is affiliated with the company’s CEO and controling shareholder, Mr. Evangelos Pistolis. Throughout his tenure at TOPS, Pistolis has led the company into various bad financing moves in order to line his own pockets by keeping his ridiculous salary and bonus structure in tact.
Now, to make matters worse, we have the Family Trading credit facility. Due to bad moves associated with this 10% credit facility, the company has already paid well over a million dollars and has issued around a million new shares as payment for fees associated with commitment, extension fees, and interest.
So, what we’re seeing is not a CEO that believes so much in his company that he’s willing to put his neck on the line in a credit facility to keep it running. No, Pistolis is bleeding the company dry by continuing his exorbitant lifestyle at the cost of investors while charging the company itself interest and exorbitant fees under a credit facility in order to further line his pockets.
The Real Deal
Here’s the real deal when it comes to TOPS: The stock is garbage. Sure, it has had a history of dramatic gains. However, that history is also marred by dramatic declines that overshadow any growth seen. With a management team that is more interested in lining their own pockets than those of investors, a history of bad financial moves, and signs that Pistolis is digging deep to get every dollar he can out of the company, I wouldn’t touch this stock with a ten foot ugly stick!