From CTRM's 20-F SEC filing, March 8, 2023:
On May 28, 2021, we effected a one-for-ten reverse stock split on our common shares. All share and per share amounts have been retroactively adjusted to reflect the reverse stock split. The par value of the common shares remained unchanged at $0.001 per share.
On November 15, 2022 and December 30, 2022, the disinterested and independent members of the board of directors of the Company, based on the recommendation of a special committee of disinterested and independent directors, approved and authorized, subject to the fulfillment of certain conditions, the spin-off of our Aframax/LR2 tanker segment and Handysize tanker segment, whereby our tanker-owning subsidiaries and the holding company of the now sold tanker vessel M/T Wonder Arcturus would be contributed to the Company’s wholly owned subsidiary, Toro, in exchange for (i) the issuance to the Company of 9,461,009 common shares of Toro,
So, at the time... CTRM owned Toro... as holder of the majority of the equity... and... a 6-K, Nov 16, 2022:
"In the Spin-Off, Castor shareholders will receive two common shares of Toro Corp. (“Toro”), a newly formed subsidiary that will act as the holding company for the eight tanker vessels, for every five Castor common shares held at the close of business on December 6, 2022 (the “Record Date”). The distribution is expected to occur on or about December 15, 2022 (the “Distribution Date”).
That would have been 38 million shares of Toro, if the current 96M of CTRM was correct, back then...
As 38M is more than 9.4M actually issued... and is less than the current Toro OS of 19.2M... there's a bit of a bouncing ball in the maths, there, that requires sorting. On the face of it, it appears they punted on the 2 for every 5, and settled on a 1 for every 10... Or, did they do a 2 for 5... and only distribute 1 for 10 to CTRM holders... while keeping half as a share holding for CTRM ? It isn't obvious to me, yet... but, the math seems "challenged"...
The event of distribution didn't occur until March 6th... so, between Nov 16 and Mar 6... there were changes enabled that have to be tracked down and sorted out, to make sure everything ended up where it was supposed to be going...,
The deal as completed also included...
(ii) the issuance to the Company of 140,000 1.00% Series A Fixed Rate Cumulative Perpetual Convertible Preferred Shares of Toro having a stated amount of $1,000 per share and...
That's a stated value of $140M... while Toro's market cap, at close today at $5.99/sh, was only $115M... but, also, Toro lists only $5.4M in debt... So... ???
CTRM "more or less" controlled Toro (back then, post-distribution), as holder of the bulk (9,461,009) of the shares, and holder of the convertible note... except... TORO currently has 19.2M shares outstanding... with insiders (including CTRM) owning only 50.06%... or 9,611,520 shares. On 5 Jan this year, Simply Wall Street noted "insider buying": Over the last year, we can see that the biggest insider purchase was by CEO & Chairman Petros Panagiotidis for US$19m worth of shares, at about US$2.29 per share. We do like to see buying, but this purchase was made at well below the current price of US$5.89. Because the shares were purchased at a lower price, this particular buy doesn't tell us much about how insiders feel about the current share price.
That has the CEO buying another 8,296,943 shares of the now 19.2M outstanding, or buying 8,296,943 shares of the now 9,611,520 held by insiders... meaning the CEO's holdings of Toro before the buy... had to be fewer than 1,314,577 shares ? So, also meaning the CEO didn't own more than 1.3 million CTRM prior to the distribution... getting him to 9.56M of the 9.6M insiders hold ? And, then... the spin out was 9,461,009 shares... so the spin out plus CEO purchases totals 17,757,952 shares of the 19.2M... leaving only 1,442,048 shares to be accounted for... against a float of 8.31 million ?
It appears there's some sort of Bistro Math happening here... perhaps mine... but... it is simply not clear to me how the "deals" announced... get us to the numbers we're looking at...
Back to "the deal"... including...
(iii) the issuance to Pelagos Holdings Corp., a controlled affiliate of Mr. Petros Panagiotidis, of 40,000 Series B Preferred Shares of Toro, par value $0.001 per share against payment of the par value of such shares (such transactions, collectively, the “Contribution”).
They don't break down the various classes of shares clearly, or define the rights associated with them... but, you can count on the Series B being "control" shares... even if without the $1000 per share par value in the 140,000 Series A Fixed Rate Cumulative Perpetual Convertible Preferred Shares owned by CTRM.
On March 7, 2023, we effected the Contribution and distributed on a pro rata basis all common shares of Toro received in the Contribution to our holders of common stock of record at the close of business on February 22, 2023 (the “Distribution”, and together with the Contribution and related transactions, the “Spin-Off”).
The date is important... as is apparent when you consider the chart... to computing how CTRM holders came out in the deal...
As of the date of this annual report, we and Toro operate as independent publicly traded companies each listed on the Nasdaq Capital Market. Pursuant to a Contribution and Spin-Off Distribution Agreement entered into with Toro, Toro replaced us as guarantor under the $18.0 Million Term Loan Facility (as defined herein) with effect from March 7, 2023. The Contribution and Spin-Off Distribution Agreement also provided for the settlement or extinguishment of certain liabilities and other obligations between us and Toro.
So, Toro assumed $18 million in debt... and then, also, some wholly undefined set of "liabilities and other obligations" evaporated in the deal...
Further, on November 15, 2022, our independent, disinterested directors, on the recommendation of a special committee comprised of our independent, disinterested directors, resolved, among other things, to focus our efforts on dry bulk shipping services. This does not, however, preclude us from pursuing other opportunities and we entered the containership shipping industry in the fourth quarter of 2022 with the purchase of two containership vessels. As of March 7, 2023, our Chairman, Chief Executive Officer and Chief Financial Officer, Petros Panagiotidis, also serves as Chairman and Chief Executive Officer of Toro.
For further information regarding the Spin-Off, refer to “Item 4. Information on the Company - A. History of the Company” and “Item 7. Major Shareholders and Related Party Transactions - B. Related Party Transactions” and Note 18 to our consolidated financial statements included elsewhere in this annual report.
So, a lot left to sort through to try to figure out which shell actually has the marble under it...
Reading through the rest of that document, though, it is apparent they weren't counting on there being "an event" that suddenly had day rates soaring... and the value of even older hulls suddenly doubling.
The market cap of both, together, is $151.945M... combined net income is $154.65M... so, yeah, both sport a P/E of less than one... on top of $214M in cash between them... $111M at CTRM, $103M at TORO.
And, that's all based on TTM and prior quarter numbers... from BEFORE the events suddenly drove rates and values higher ?
So, probably worth the effort in the DD to sort it out... and figure out where the marble is... and where its going ?
I don't find the numbers particularly unusual... shipping is like that... big numbers, and big debt... and then suddenly things go either ridiculously well.... or horribly, horribly wrong...
When demand is high... a old boat can pay for itself remarkable quickly...
One of my early successes... talking late 70's... was buying a $0.25 shipping stock that was formerly $20, has been bumping the bottom in recession for a year... clearly heading toward BK, and would have been save for the inordinate patience of a lender... when the market suddenly turned around, and they sold hulls that were tied to the dock and headed for scrap, and instead of going BK... they spun out a divvie of $1.50 in cash...
"That can't happen"... is wrong.
But, that it can happen... doesn't mean it will in this case ?
Somalia and Yemen... not the only places you can find pirates. There's also the South China Sea... and Wall Street... ? |
