NEW YORK (TheStreet) -- Shares of Frontline (FRO) are plummeting, sharply down 18.47% to $2.34 on heavy trading volume Tuesday afternoon, following the oil tanker shipping company's announcement of a new debt-for-equity exchange.
Bermuda-based Frontline said that it signed a private deal to exchange $22.5 million of its 4.5% convertible bond for 3.9 million shares at $3.12 per share, which represents a 9% premium to Monday's closing price.
The exchange also includes $9.6 million in cash, plus accrued interest.
The company will issue an additional 760,377 shares to bondholders on December 23 if the five-day volume-weighted average price of its shares for the period ending December 22 is lower than the exchange price.
About 4.43 million shares of Frontline traded hands as of 2:29 p.m. Tuesday, compared to its average trading volume of about 1.43 million shares a day.
Separately, TheStreet Ratings team rates FRONTLINE LTD as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate FRONTLINE LTD (FRO) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, poor profit margins, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 63.6% when compared to the same quarter one year ago, falling from -$36.45 million to -$59.65 million.
- The gross profit margin for FRONTLINE LTD is rather low; currently it is at 24.68%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -43.98% is significantly below that of the industry average.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 48.59%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 30.43% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- FRONTLINE LTD's earnings per share declined by 30.4% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, FRONTLINE LTD reported poor results of -$2.38 versus -$0.91 in the prior year. This year, the market expects an improvement in earnings (-$0.44 versus -$2.38).
- Net operating cash flow has significantly increased by 669.73% to $17.73 million when compared to the same quarter last year. In addition, FRONTLINE LTD has also vastly surpassed the industry average cash flow growth rate of -1.58%.
- You can view the full analysis from the report here: FRO Ratings Report