Summary
While not the epitomy of evil that Jim Kramer describes, George Economou has lost his way somewhat.
Analysis
I was an ardent fan of George Economou in the early years of DRYS. Of all the newly public companies, George acted the most like a private shipowner. Recognizing the tremendous increase in demand and the gap in supply, George committed his fleet to spot charters and subsequently garnered all of the upside for his shareholders.
Economou, to much criticism, utilized his private holdings as a more nimble mechanism for fleet growth while charging his shareholders reasonable transaction fees. The results spoke for themselves.
George remained on track when Cape resales first breached the $100M level, for a while avoiding acquisitions at this level. This was the time that he first veered from the private model. Normally, private owners would be seeking to sell their assets at the height of the market. By early 2007, the future orderbook was certain to exceed realistic demand scenarios. Tremendous profits were there to be had, and timing asset disposals was arguably difficult.
Instead of disposing of assets or resisting fleet expansion moves, George jumped into the newbuild and resale markets at prices unsustainable by realistic rate levels.
The expansion into the offshore services market is a story yet to be told. I personally think that this will pan out as a very smart move.
George's last move consistent with private ownership was the move into term charters at the height of the market for periods spanning the uncertain 2009-2011 years. Unlike many public companies, he has been very agressive in enforcing charter parties and resisting the impulse to restructure.
Lately, George has been forced into the public company behavioral response mode that shuns risk and focuses on short term earnings. The purchase and newbuild cancelation fees has been exceptionally painful, as has the dilutive issues of new equity. Despite the bluster, it is unlikely that significant new capacity will be purchased in the near term.
Hopefully, market improvement in 2011 will allow Economou to resume his normally facile operational strategy for the benefit of DRYS shareholders.
