In the last week of September, Ocean Rig UDW Inc. (NASDAQ:ORIG) released a press release wherein it reported that it was non-compliant with NASDAQ listing guidelines. The stock traded below $1 for thirty business days in a row, and now the firm has time until March 2017 to solve this problem.
Ocean Rig has enough time to become compliant with the NASDAQ listing rules. Three cases may arise until the close of March. First, the company may really submit for bankruptcy. Second, ORIG stock price may move above $1 per share, which will make the delisting worry off the table. Lastly, the company can opt for a 1 for 10 reverse split to increase the shares price.
For most of the market experts, the management statement that the firm may submit for bankruptcy didn’t came as a surprise. However, the announcement time was seen as a bit earlier, as the firm’s maturity situation visibly offers the firm some waiting time. Still, there is a probability that the company’s rearrangement will commence soon and close with bankruptcy. The market recorded plenty of strange moves by management this year.
Ocean Rig purchased its stock from DryShips Inc. (NASDAQ:DRYS) and didn’t cancel them. The firm created a new subsidiary named Ocean Rig Investments and purchased a drillship just to instantly cold stack it. It suddenly reported its restructuring, crushing shares price and burying the bulls’ expectations that it was planning to liquidate the shares purchased from DryShips. A sudden bankruptcy goes well in the series of events.
There appears to be a no valid reason as to why company rushed to engage restructuring advisors and informed the market about a probable bankruptcy. Analysts see no fundamental reasons behind this rush. Yet, there were no main reasons to purchase a cold stack and drillship it either.
The practical outcome is that the firm may really submit for bankruptcy or report potentially dilutive restructuring plans any day now, and therefore all speculative trades must be sized accordingly. Fundamentally, oil trading around $50 will not have considerable impact on the offshore drilling industry. So, bankruptcy fears will exist, bringing pressure on the firm’s shares.