seperator boardlist separator aboutus home separator addtitle
logo logotitle
Sign in here!    

Vessels Shipyard Scrap Spareparts FreightExchange InvestorsSquare Directory
 
FreeSeas Raises $90 million in Transformational Equity Offering Dated : 29-10-2007

CEO Ion Varouxakis describes the deal as company-transforming, saying that it is in effect the real IPO for the company. And it is easy to see why. Having begun life as a public company with a paltry $7 million SPAC, this deal, which has already raised $90 million and could raise over $100 million if the over-allotment option is exercised, at long last gives the company the scale to compete as a publicly listed dry bulk company. It provides the company with the funding necessary to pursue acquisitions of secondhand vessels in the handysize and handymax sector. It also provides them with a new investor base that FM understands to be of high quality. In addition to investors gained, the increased size of the company provides it with the visibility necessary to gain analyst coverage and develop their base of potential shareholders.
The strength of the company’s business plan, the company’s recent growth, the management team’s commitment, and, of course, the current dry bulk market environment were enough to not only get the deal done, but to see it oversubscribed and upsized. Meanwhile the company’s shares are currently trading around and above the $8.25 offer price, with robust upside potential in the event accretive acquisitions are successfully consummated.
Free Background
To understand why FreeSeas’ deal this week is so special, we take a brief trip back to the company’s beginning. FreeSeas’ parents, so to speak, were a SPAC called Trinity Partners Acquisition Company and a small shipping company called Adventure Holdings.
Trinity Partners completed its IPO on August 2, 2004 to raise an incredible $7,877,500, incredible because the deal itself is smaller than the fees we have seen for some shipping IPOs in New York. Trinity sold two series of units. Series A units were issued at $10.50 and included two shares of common stock and a total of ten warrants to purchase common shares at a price of $5.00. Series B units were issued at $10.10 and included two shares of Class B common stock and a total of two warrants to purchase common shares at a price of $5.00. Only Class B shares included the right to vote on a proposed acquisition. HCFB/Brenner Securities acted as bookrunner on this initial transaction.
Adventure Holdings was a holding company set up by George and Stathis Gourdomichalis and Ion Varouxakis. It owned two 1980sbuilt handysize bulkers acquired from Marinakis’ Barclay Shipping in 2004 for $17.5 million. Adventure Holdings ultimately changed its name to FreeSeas and reverse-merged into Trinity, with FreeSeas left as the surviving public corporation.
This had all occurred by December 2005 and for a while the company was pretty quiet. In September of 2006 FreeSeas announced plans for a convertible offering worth $15 to $22 million. Not a huge offering, but meaningful for a company whose market capitalization at the time was probably a little over $30 million and also interesting in the choice to use convertible notes. However the transaction was never consummated, and the next we heard from FreeSeas was that the Gourdomichalis brothers were selling out their stakes to CEO Ion Varouxakis for a total just over $10 million. From the outside it was impossible to tell if the company was slowly dissolving itself after a failed growth attempt or if this was in fact the next step in its development. At approximately $3.27/share, the Gourdomichalis brothers looked like they gotten a good deal as FreeSeas’ shares hit a low of $2.56.
But that was too low, really, and it appears to have attracted the attention of the Restis family as an attractive opportunity to invest in the dry bulk industry as well as FreeSeas’ potential. In the second week of January 2007 it was announced that Restis affiliate FS Holdings had purchased a 33% stake in FreeSeas – for a grand total of around $6 million. Even so the purchase breathed life into the stock and it was soon trading back up above $4.00. Kostas Koutsoubelis, Group Financial Director of the Restis interests, was brought in as Director, VP and Treasurer of FreeSeas. This wasn’t the first time there had been a relationship between the management of the two companies: Ion Varouxakis of FreeSeas was also slated to be on the board of the Restis Group’s withdrawn Golden Energy IPO. Then in May Dimitris Papadopoulos was appointed as the new CFO.
Transactions after that in 2007 were relatively small, involving the sale of one 1982-built vessel for $11 million and the expansion of the company’s its initial two-vessel fleet to five vessels. Importantly the expansion also brought down the average age of the fleet to closer to 15 years and diversified FreeSeas’ handysize exposure to also include the handymax sector.
These transactions are all small enough that they would rarely even be reported, but they provide a fascinating insight into how a very small company can attain the critical mass necessary to become an important player. All the more reason why the deal priced for FreeSeas this week is more than just your ordinary follow-on offering. It was in reality a transformational transaction that has provided the company with a solid platform on which to grow its fleet. We look forward to seeing how the new funds are put to use.
 
I Register I Contact us I Terms and Conditions I Privacy policy I Shipping History I Maritime News I Ship Gallery I  Sitemap