Imperial Petroleum (NASDAQ:IMPP) is an international shipping company based in Athens that specializes in the transportation of petroleum and petrochemical products in liquefied form. The company reported its fourth-quarter and full-year 2021 financial results on March 29, and they show IMPP stock is a sell.
Imperial Petroleum went public on Dec. 6, 2021 after a successful spinoff from StealthGas (NASDAQ:GASS), another international shipping company. On its trading debut, shares of Imperial Petroleum had a wild price swing, opening at 40 cents, marking a high of $8.30 and closing at $7.50. In February and March, IMPP stock rallied from nearly 50 cents to its 52-week high of $9.70. It’s since fallen to a price of $1.20.
There is an explanation for this huge IMPP stock price volatility. Starting with its latest earnings report, Imperial Petroleum saw a Q4 decline in revenue of 28.6% to $4 million compared to revenue of $5.6 million in Q4 2020. It also had a net loss of $1.5 million in Q4 2021 compared to a net income of $200,000 in Q4 2020.
For the full year, Imperial Petroleum announced a decline in revenues of $2.9 million, or 14.3%, to $17.4 million versus $20.3 million for the 12 months ended Dec. 31, 2020. It saw a net loss of $3.6 million compared to a net loss of $400,000 in the prior year. Having widening losses is the first red flag.
Things get worse for this shipping company for two more reasons. The company raised cash in a dilutive public offering in February, with gross proceeds of $12 million on its offering of 9.6 million units for $1.25 each. Then in March, it offered 37.5 million units for $1.60 each, raising gross proceeds of approximately $60 million.
This is a massive stock dilution in the first quarter of 2022 given the fact that, according to its fiscal 2021 results, “the weighted average number of shares outstanding for the 12 months ended December 31, 2021 was 4.8 million.”
It gets even worse for Imperial Petroleum. On its balance sheet as of Dec. 31, 2021, the company had cash and cash equivalents of $3.4 million and total debt of $28 million.
IMPP stock is a sell now after its massive stock dilution, net losses and a large amount of debt. These combined with a very relatively low level of cash can cause a major liquidity and solvency problem.
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On the date of publication, Stavros Georgiadis, CFA did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.