Thread by @valley_llama

Good interview with CEO Hugo De Stoop

I admire Euronav's performance and Mr De Stoop's articulate and transparent discussions on the tanker market and the company's operations.

However, one exception is the discussion of growth. He trumpets Euronav for having grown from 7 or 8 ships to 60 in his 16 years there.

Fact check:

At the end of 2009 Euronav had a fleet of 36 tankers and 50 million shares outstanding.

A decade later...

In 2020 Euronav has a fleet of 64 tankers and 200 million shares outstanding.

The number of vessels per share has fallen by half.

Vessel values and leverage vary, so this is not a perfect measure of equity growth. But it is a good approximation. Fact is that it was not totally their fault. The tanker market has been plagued by oversupply and low rates for most of the last decade.

However, I would expect from Hugo that he simply be forthright and acknowledge that they diluted, albeit perhaps to a lesser degree than competitors thanks to disciplined capital allocation, and because of circumstances beyond their control.

Shipping is not a growth business. It is a cash flow business, and it is cyclical. Excess profits are earned by trading ships.

If the management of a shipping company tells you they aspire to grow their company, you should ascertain whether the proposed strategy involves gradual, counter-cyclical expansion on a per-share basis, and whether stated plans match past performance.

Or, if they are hell-bent to grow their asset-based fees at any cost to shareholders in equity dilution, high-interest loans, and the risk accompanying a high degree of financial leverage.

If you can't figure it out...

Hit the bid!