Euroseas and Citi Join Forces

About two weeks ago, Euroseas, utilizing its existing shelf registration, entered into a continuous offering program equity distribution agreement (“COPED”) with Citi to sell up to 7 million shares of common stock from time to time through Citi as a sales agent. Under the terms of this equity distribution agreement, Citi may act as a principal and purchase shares at a price agreed upon at the time of sale. For its services Citi will be paid a commission of 2% of the gross sales price. Proceeds will be used for general corporate purposes and to fund vessel acquisitions.

Since the transaction was announced on September 4th, the share price has steadily risen from $4.40 to 4.76 on average volumes of about 96,000 shares.

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Gleanings from Capital Link

Following the CMA, Capital Link held its 3rd Annual Invest in International Shipping Forum at the Metropolitan Club, which was overflowing for much of the day. There were general presentations, panels as well as company presentations. The following were our main takeaways from this forum.

The container sector has been the hardest hit and so we listened with great interest to that panel led by Ken Hoexter of Banc of America Securities-Merrill Lynch. The panelists included Gerry Wang of Seaspan, Aristides Pittas of Euroseas and Dimitiri Andritsoyiannis of Danaos. The collapse of the market is attributable to simple supply and demand. Overbuilding joined with reduced demand resulting from a slowdown in consumer buying. Mr. Wang believes this is a 12 to 18 month problem with 2012 to 2014 being good years. The lines will survive as they exercise self-help by utilizing alliances, like the airlines. Slot sharing is not as effective as filling a single ship instead of having two partially filled. Mr. Andritsoyiannis espoused the certainty that globalization will continue and that the containership is the only way to efficiently move finished goods. Mr. Pittas reminded everyone that it is a cyclical business and the good market will return. He plays the market more than his fellow panelists. He operates his smaller ships on shorter-term charters taking advantage of good markets and laying up vessels when the market is bad. He currently has three ships in lay-up and is relying on his solid balance sheet to get his company through the downturn.

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Oppenheimer Initiates on Containership Sector

Tim Tiberio and Lawrence Lee of Oppenheimer have released their first report on the containership sector, rating all three companies under coverage – Danaos, Seaspan and Euroseas – an impressive Outperform. To support this they cite several factors, including the shielding effect the leasing model provides from near-term cyclicality. While the analysts expect a moderation in global container volume growth in 2008, they expect growing consumer demand in Asia and Eastern Europe, ongoing globalization, and the continual growth of offshore manufacturing will continue to drive long-term growth in the sector.

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