NEW YORK (TheStreet) -- Ocean Rig (ORIG) shares are down 9.52% to $7.32 in early market trading on Wednesday after the company priced the secondary offering of 28,571,428 of its common shares.
Ocean Rig priced its offering a $7 per share, a 13.5% discount from the stock's closing price yesterday.
The company also announced that CEO George Economou is purchasing $10 million, or 1,428,571 shares, of common stock as part of the offering which is expected to close June 8.
Ocean Rig plans to use the proceeds from the offering for general corporate purposes including purchasing additional drilling rigs.
TheStreet Ratings team rates OCEAN RIG UDW INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate OCEAN RIG UDW INC (ORIG) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and generally higher debt management risk."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 1.7%. Since the same quarter one year prior, revenues rose by 11.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Energy Equipment & Services industry. The net income increased by 2771.5% when compared to the same quarter one year prior, rising from -$1.54 million to $41.14 million.
- OCEAN RIG UDW INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, OCEAN RIG UDW INC increased its bottom line by earning $1.97 versus $0.48 in the prior year. For the next year, the market is expecting a contraction of 26.4% in earnings ($1.45 versus $1.97).
- ORIG's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 55.45%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- Currently the debt-to-equity ratio of 1.51 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Regardless of the company's weak debt-to-equity ratio, ORIG has managed to keep a strong quick ratio of 1.94, which demonstrates the ability to cover short-term cash needs.
- You can view the full analysis from the report here: ORIG Ratings Report