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The pros and cons of being a public-listed shipping company

The pros and cons of being a public-listed shipping company
It is a perennial question as to whether being publicly listed as a shipping company actually makes sense given the long-term nature of the industry and the costs associated with being listed.

Many shipping companies have tried listing around the world over the years, but few remain over the long term. The value of being publicly listed and accessing the capital markets was a topic for debate among owners at the Tradewinds Shipowners Forum during Posidonia 2016 last week.

Robert Burke ceo of Ridgebury Tankers noted that among the US-listed shipping companies he could only think of one that remained from the 1980’s, and similarly just one from the 1990’s.

Coming down firmly against being public-listed as a shipping company was Philippe Louis-Dreyfus, president of Louis-Dreyfus. “I would never ever go public in shipping. Not in today’s market, not in 10 years ago market, and not in 10 years to come market,” he stated.

“I don’t believe listing and public money is for shipping. Shipping needs a long term views, shipping needs patience from shareholders over the long term and that’s something you might not get from public markets. I see the complications and the burdens of having a listing far in excess of the advantages.”

Inbetween urging the audience to buy Euronav shares, “disagreeing vehemently” with Louis-Dreyfus was the tanker company’s ceo Paddy Rodgers.

He said five years ago he would have agreed but highlighted how the banking market had changed in that period. “Why would you go through the pain of being Frontline, OSG or Genmar in the public markets in 2006 and 2007 when people could go on a almost personal basis to a German banker and get 110% of the finance of a ship a just a few points above Libor. It just made no sense to be public.”

However, Rodgers pointed to the huge deleveraging by banks over the last few years impacting the ability to access cash, with banks cutting anything with a high risk weighting such as shipping and offshore.

“There will be no bank finance available. If you are bigger and you are public, and you can comply, you will have a competitive advantage for the first time in the history of shipping by being public through access to capital,” Rodgers said.

However, Burke also was against being a public company, but reasons of the fact a shipping company can only access capital market funding when the market is high, which goes against the shipping strategy of investing when vessel prices are low.

“The problem with the capital markets is the only times a public company can raise is when the market is very high, we’re such a small piece of the market cap in the States or anywhere else in the world we only attract attention when the market is high,” he explained.

“If public companies can only raise money when the market is high they can only buy when the market is high. So if its long term low return on equity eventually that has a high average price on vessels then it is doomed to sub-par returns and even failure.”