DryShips (Nasdaq: DRYS) owns and operates a fleet of cargo ships. The company's fleet carries various dry bulk commodities, including coal, iron ore, and grains, bauxite, phosphate, fertilizers and steel products. It was founded in 2004 and is headquartered in Athens, Greece.
Not the most favorite company of Fools, the stock price went screaming up more than six-fold in 2007 and came crashing back down by the end of the year, falling back to its pre-move prices by late 2008. The rapid climb did not appear to be tied to any fundamental performance of the company. Fool readers voted this company the World's Scariest Stock in the fall of 2007.
There is a fair amount of controversy surrounding the founder and CEO, George Economou, who seems to have little concern for common shareholders. Former Barron's editor Kathryn M. Welling pointed out in a newsletter column in 2005 titled "The Golden Fleece?" a troubling point: "It was surreal," a source told Welling in relation to DryShips' IPO. "When someone asked why he was doing the deal, here-now, [Economou] actually said, basically, 'Because Americans are the dumbest investors around, and there's lots of liquidity in this market.'"
Further, according to one of its filings, Dryships' ships are managed and chartered by a privately held firm called Cardiff Marine. In 2006, Mr. Economou controlled a foundation that owned 70% of Cardiff and 35.5% of Dryships. Since Cardiff is a separate entity from Dryships, Mr. Economou can then manage other ships in competition with Dryships. To quote from one of Dryships' 20-F filings: "In particular, Cardiff may give preferential treatment to vessels that are beneficially owned by related parties because Mr. Economou and members of his family may receive greater economic benefits."
Finally, prior to the IPO in 2005, management issued a special dividend of $69 million to the Economou family, essentially all of the company's retained earnings up until that point, leaving just $7 million in cash on the balance sheet.