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Billion dollar market cap needed to be a public-listed shipping company

Billion dollar market cap needed to be a public-listed shipping company
If you want to be a publically-listed shipping company you need to have a clear plan to reach a $1bn market cap was the message from speakers at Marine Money in Singapore.

Asked about his experiences running Singapore-listed shipping trust FSL Trust Philip Clausius, now managing partner with Transport Capital, said that shipping companies looking at an IPO needed to have a plan to achieve a market cap of $1bn within a relatively short time frame. Without this level of market cap most large investment funds will not have any interest in the stock.

As well as a having a $1bn market cap Hugo De Stoop, cfo of Euronav, stressed that liquidity was extremely important.

Until early this Euronav was solely listed on the Euronext exchange in Belgium and according to De Stoop only had a trading volume of around 1m shares a day. As a result it took a long time for investors to build up a position, and it was also difficult to exit that position in one go without also influencing the stock price.

With an IPO on the New York Stock Exchange earlier this year Euronav now has a trading volume of around 20m shares a day according to De Stoop.

He added: “If you don’t have a billion dollar market cap you will never get the trading volume you require.”

In a cautionary tale to those in shipping looking for a public-listing Clausius said publicly traded companies are expected to grow but this does not always fit with the shipping business environment.

“It’s not a growth industry, it's a cyclical industry. Once you are a public company you are supposed to grow,” he said.

“Sometimes it’s better to do nothing, sit still or sell, and that is very difficult as a public company.”

Clausius added that there were many good reason for a company to go public, but “you have to be aware shareholders want growth in the next quarter”.