Today, shares of Castor Maritime (NASDAQ:CTRM) are on the move. At the time of writing, investors in CTRM stock are looking at a 20% paper loss as the seaborne shipping company made a key announcement that has sent shares spiraling downward.
To date, Castor Maritime has become one of the meme stocks investors have piled into in a big way. Similar to other high-profile stocks with significant speculative retail investor interest, CTRM stock took investors for a ride earlier this year. However, like many such stocks, Castor Maritime has been under pressure of late as the market reprices these speculative assets.
One of the key drivers of interest in this stock has been the company’s aggressive capacity expansion. Castor Maritime has been a big buyer of used shipping vessels of late, at a time when shipping rates remain elevated. This move, coupled with optimism around economic activity picking up as the global economy reopens, has been generally bullish for the story underpinning CTRM stock.
That said, here’s more on the announcement that has shares sinking today.
CTRM Stock Down on Equity Issuance News
Today, Castor Maritime announced it would be raising $125 million through issuing 192 million shares and 192 million warrants at 65 cents each via a direct offering. This purchase price represented a 12% discount to Thursday’s close.
Investors seem to be viewing this raise as broadly negative right now, despite the fact this equity raise would shore up the company’s cash position and provide the growth capital Castor Maritime is looking for to expand its fleet. Indeed, it appears this direct offering puts a ceiling on CTRM stock in the near term. And importantly, the steep discount investors demanded for this issuance has spooked investors.
It appears the market is pricing in increased volatility in speculative small-cap stocks today. While Castor Maritime does look to have some attractive attributes, its size relative to its competitors puts the company in an unfavorable position when it comes to raising capital. Growth isn’t free, especially in capital-intensive sectors like maritime shipping. It appears investors are realizing this today.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article.