Economy, all along, adapted to the needs of those who produce. The 1^st was Money, terminating the inconvenience caused by exchanging goods for goods (Barter Economy). Money is useful: it is a medium of exchange; expresses prices, and accounts; it is also a store of value. Money’s validity depends on trust¹, and acceptance, by all (except during abnormal times). Important is that money is also a mean of building-out an investment, i.e., it is used to build a factory, to buy machinery, to hire and pay employees etc. This is an important process where monetary capital is transformed into fixed capital². We all know the importance of fixed capital.

To possess money is a necessary condition—but not a sufficient one—for starting-up a company; know-how is also needed. Keynes established, in a more correct way than the Classics, the factors, in 1936, which determine the demand for money (as well money for… speculation³)... Thus, money has a demand as well as a supply⁴, and a price (=rate of interest).

Economies established also an important institution: the banks, where money from savings could be deposited, and earn also an interest⁵. “The interest can be defined as the amount of money one has to pay to convince its holder (lender) to depart from its possession and use for a mutually agreed time”.

Banks⁶ are established⁷ very early (c. 1700 AD). They attracted the majority of savings⁸ of people, of firms and of governments, under normal circumstances⁹. This was a great step forward. Moreover, bankers realized that people deposit their savings in the banks, but rarely come all at once to withdraw them, under normal circumstances. If this happens it means bankruptcy—which happened in 1929-1933. So, banks decided to keep, say¹⁰ a 12%, or so, of total deposits on demand, and the rest to be lent to those qualified for. Loans are given by banks at a rate of interest higher than that paid to cash deposits so that the bank to make a profit and to cover its expenses.

Banks dominated in the finance of the Greek-owned shipping companies: in end-2006 they devoted $46 b; in 2014, $64 b and, in 2015, $63 b, three times more than those raised from Stock Exchanges-SEs in Jan. 2008 of $21 b. Commercial banks have an advantage, vis-à-vis SEs, we reckon, by providing a personal environment, where the terms of a loan can be negotiated with company’s finance manager.

Also, a shipping company may re-negotiate, with its bankers, a loan during bad times, which is very important. Banks and companies count on reciprocity, and they should be partners. The banks eventually had difficulties providing loans to enterprises at levels, which were increasing continuously for various reasons: one being inflation and the other being economies of scale.

Banking loans are related to total cash deposits¹¹ owned by bank’s customers. Important is, however, that banks pay attention also to the risk involved in bigger loans. Banks solved this, i.e., to provide big loans, by forming¹² groups, and providing “syndicated¹³” loans. Shipping industry has a great appetite for finance given its investment program every year, which in 2007 reached $150 b from $25 b in 1997 for containerships, tankers, gas and bulk carriers, and 2^nd hand ships ($55 b; ~1/3) (Stopford, 2009: p. 270). In end 2016, Greeks have ordered in the past 3 years new ships valued near $18 billion.

Economies established Stock Exchanges. In USA, this happened in 1790 (“Philadelphia SE”), and in 1792, established the well-known NYSE, preferred by Greek-owned shipping companies along with NASDAQ¹⁴, which established in August, 1971. Unfortunately, both Banks and certain Stock Exchanges became profit-seeking¹⁵ establishments, while we believe, for their mission, they should remain “state non-profit institutions” (as the Athens SE, established in 1876).

Today, a great part of maritime transport continues to be under depression since end-2008, as shown by the BDI (Baltic dry cargo index) (Figure 1). This index fell from almost 12,000 (11,793) units, in May, 2008, to about 500 units in Dec. 2015. Moreover, in 22^nd December, 2020, the index reached 1348 units and in 06/10/2020 2050 (source: internet). The index covers the transportation of raw materials and those for constructions, coal, grain, iron ore etc.

This solved, we believe, a number of issues: 1) When freight markets are high, banks “rush” to provide¹⁶ finance to shipowners, but when markets are in a recession or depression, banks stop”! This happens, though the opposite is absolutely necessary and right. 2) To trace the slow progress of Greek-owned shipping companies to raise finance, mainly since 2005, from NYSE and NASDAQ by majority, till 2018. Similarly, we traced the progress of international shipping companies since 1993. 3) We wrote-down the advantages and disadvantages of raising money from Stock Exchanges. 4) We added an important factor, which both banks and Sock exchanges ignored so far, and this is the “future net asset value”—NAV.

The paper is organized in 4 parts, as follows, after literature review: Part I deals with the advantages and disadvantages to seek finance from Stock Exchanges. Part II deals with the history of shipping companies in international stock exchanges, 1993-2018. Part III deals with shipping “asset play”. Part IV deals with the possibility to obtain finance based on future NAV¹⁷. Finally, we conclude.

Keynes (1936: p. 150) described, without knowing them, … the Greek shipowners! He wrote (slightly modified): … “when enterprises were mainly owned by those who undertook them…, investment depended on a sufficient supply of individuals of sanguine temperament and constructive impulses; (they) embarked on business as a way of life, (and) did not really rely on a precise calculation of (the) prospective profit”.

Stokes (1997: p. 181) mentioned: 1) Shipping Industry complained for being ignored by stock markets! 2) Stock markets considered shipping industry… risky, unpredictable and unreliable! 3) There was also a gap¹⁸ between the valuations by companies and those by SEs¹⁹! The real problem, we believe, is sector’s cyclical behavior.

In 1997, companies listed, related to marine industry²⁰, including shipping ones, were globally 150; 16 of them²¹, in mid-1996, had a capitalization of ~$31 b. If this is compared with the New York stock markets, where capitalization was $51 trillion, this was only 0.61%! Thus, SEs were right to consider shipping industry negligible… 25 years ago. Moreover, shipping sector, in mid-1996, had a plethora of (under-capitalized) shipping companies till today. We estimated that the global shipping companies in 2021 are approx. 25,000 worldwide, of which only 750 are large (3%).

Apergis and Sorros (2010) investigated the impact of earnings, coming from selling ships, on stock prices, taking 36 listed international shipping companies (2000-2008). They found that the earnings were stronger than the operating ones. They used a panel co-integration, and causality tests. They indirectly showed that shipping research is indeed poor, as from their 42 references, none referred to shipping! They took a sample of 80 listed firms in NYSE, London, Singapore, Hong Kong and Tokyo (total 3200 observations). They confirmed that income from sales of ships explains better the variations in returns.

Maritime economists know, empirically, that a good sale provides 3 years of operating net profits. These earnings, however, cannot be obtained every year, and asset play is not the core business of shipowners as presented in part III.

Drobetz et al. (2010) analyzed macroeconomic risk, and the expected stock returns, in the shipping industry (containerships-23 firms, tankers-21 and bulks-10), using monthly returns of 48 listed companies (1999-2007) and a SUR model (a seemingly unrelated regression). They concluded that shipping stocks exhibit remarkably low (stock market) betas-βs²². This means that these shipping βs are not sensitive to market moves, they dampen risk and so they are attractive to be included in a portfolio.

However, one would not expect above stock prices to rise much (Mandelbrot & Hudson, 2006: p. 265). Authors felt the scientific need to use the “trade-weighted value of $”, “the change in G-7 industrial production” and the “oil price”, so that, their cross-section of expected stock returns, to be explained. We believe that by inserting containerships into their investigation, they took the wrong message about risk as their freight rates are remarkably stable vis-à-vis tankers and dry cargo ships. They argued that there is a limited research in examining shipping stocks in an asset pricing context, though they mentioned in their reference list 10 sources out of 74 related to shipping stock returns, between 1996-2006.

Grammenos & Marcoulis (1996) took a cross-section of shipping stock returns and reported a market β < 1, among 11 shipping companies (1989-1993). Kavussanos & Marcoulis (1997a) analyzed the market risk of shipping stocks and compared the average β with the overall US Stock market (1985-1995); they could not relate β to S&P 500. Kavussanos & Marcoulis (1997b) compared the return structure of different transport sectors and found β < 1. Kavussanos & Marcoulis (1998) stated that the systematic risk of shipping is low (1984-1995). Grammenos & Arcoulis (2002) found negative relationships between shipping stocks and oil prices and laid-up tonnage, but not inflation and industrial production! Kavussanos et al., (2003) found a shipping stock market β < 1. Kavussanos & Marcoulis (2005) found that returns in shipping stocks are related to firm’s specific and common macroeconomic factors. Gong et al. (2006) reported a β < 1 in water transport.

Summarizing, it is remarkable to found-out, by almost a dozen studies reviewed above, that shipping βs are less than 1, and thus risk is low! This is against our experience, which says that shipping sectors, excluding containerships, are risky and volatile, as we showed this in relation to the global financial crisis in end-2008… It seems that their tools used are either not appropriate or the definition of risk is erroneous (Mandelbrot & Hudson, 2006).

One expects great benefits from “Stock Exchanges²³”—SEs. Keynes (1936) in his famous chapter 12, dealt with them, and explained their real function, in a different way, we believe, than most of us thought. Most of us thought that a SE is a unique place where enterprises can obtain, interest-free, the funds they need to finance a new investment by paying a dividend. A new investment is clearly directly contributing to country’s economic development. Thus, a SE, is, or should be, a “temple of economic growth”.

SEs, of course, have the advantage to provide higher amounts than banks, or this is what we believe, given company’s past and present “net earnings” and “cash flow”. A new investment, no doubt, creates well-founded hopes for a profit, which will bring eventually dividends to shareholders, after deducting expenses. To sell a hope for a profit, is exactly what lotteries also do!

1) 1993-2002

Source: author; (*) Hellenic C. de-listed for this reason; (**) Keynes (1936: p. 158) argued that “speculation is the activity dealing with forecasting market psychology”.

Stock exchanges were disappointed, as mentioned, by shipping’s volatility, which characterizes shipping companies till this day. We chose one company to show this (Figure 2) in relation to its “return on capital”.

As shown, this company had a positive return on capital, 8%, but only in 1991; after 1991, returns were below 1.1% or negative, till 1995. Surely, these levels could not satisfy any SE.

Let us see now the 8 major listed international shipping companies in 1993 (Table 2).

As shown, 8 shipping companies raised $822 m in 1993 (average: $103 m). Certain of the above shipping companies—called the “new wave of shipping IPOs”—were sound, having well-structured propositions, suitable to produce a rather serious performance in the aftermarket, and possessing also a rather long track record, despite the poor etc. performance in the aftermarket of 50% of them.

In mid-1996, 16 shipping companies listed internationally, capitalized at $31 b (almost 4 times up since 1993) (average rose to $1.94 b). In 1998, 262 shipping firms listed in international stock exchanges, of which 8 were Greek (3%)³². Of these 8, three issued “high yield shipping bonds”-HYB: “Eletson Holdings”; “Ermis Mar.”; “Pegasus Shipping”.

The remaining 5 were: “Anangel American Shipholdings” (ocean going); “Attica Enterprises” (coastal); “Lesvos Maritime Co” (coastal); “Royal Olympic Cruise (ROC) Lines³³”, which raised $91 m in 1995, and “Strintzis Lines” (coastal; listed also in 1994 in “Athens Stock Exchange”).

“Anangel”, established by Antonis Angelicousis was the first³⁴ to be listed in NYSE in 1996. In 2002, “Tsakos Energy Navigation” (March 5th) listed also in NYSE, raising $~109 m (7.35 m shares), in order to build ships, and repay bank loans, while in 2001 “Stelmar” has been listed.

2) 2005-2007

In the 1^st half of 2005, 5 Greek shipping companies listed in London and New York and this was their 1^st time (Table 3).

As shown, 5 Greek shipping companies raised $~1.02 b in early 2005 ($204 m on average). These were helped by the increase in their profits in 2005. Their

Source: Data from Stokes (1997: pp. 187-193).

Source: Companies’ sites and press releases.

IPOs—almost 1 per week—motivated additional 11 companies. But this was an oversupply! Eight of these 11 companies raised about $~1.39 b (174 m on average). There was obviously no coordination among Greek companies over IPO’s timing as this is classical for all matters (Table 4).

As shown, in the 2^nd half of 2005, 3 Greek shipping companies postponed their IPO due to the probability to face a weak demand due to oversupply of IPOs and a fall in freight rates.

Let us see now 2006 (Table 5).

As shown, 10 companies were listed in 2006, double of that of 2005. In 2004 almost $106 m less profits derived (except for “General Maritime”). During 2006, 3 companies are recorded in addition to 14: “TEN”; “Top Tankers”; and “Genmar”, which raised $237 m.

Source: As in previous table.

Source: As in previous Table.

In end-2006, the global listed shipping companies were 202, and the companies in HYB increased to 31, which means that investors were after a higher risk and yield than hitherto. No Greek company appeared in HYB this time. Greeks in 2006 reached 20 listed shipping companies starting from 10 (Table 6), with a total of $11 b capitalization, i.e., 10 times more than that of 2005, within one year!

As shown, “General” is the protagonist with ~22% share in total capitalization. The average capitalization ($550 m) had a substantial rise since $174 m and 204 m in 2005.

In 2007 (July), 12 more companies recorded (+), while 4 were missing (Euronav; Genco; General and ROC) (Table 7).

As shown, 28 shipping companies raised $15.3 b in 2007, against $11 b in 2006 by 20 companies: +39%) (average $546 m). The protagonist this time was “Danaos” with ~11% total capitalization. As shown, the Greek-owned shipping gradually listed in international SEs, and this, we believe, will continue, as soon as Pandemic passes away and freight rates improve.

3) The end-2008 impact on the capitalization of Greek-owned shipping companies

This part is very important. In end-2008, the Greek listed companies recorded were 25 (Table 8).

As shown, tankers in Jan. 2008, had a smaller share in capitalization: ~18%; dry cargoes ~68% and the diversified ones—including containerships—13.5%. Dry cargo ships were dominant in SEs, as less dangerous, we believe, vis-à-vis

Source: Companies’ sites and announcements.

(*) Nasdaq; (**) Nyse; (***) Singapore.

Source: Data from Xiradakis G. in “Naftika Chronika” journal, 2009, pp. 24-27; notes: (1) tankers; (2) dry cargo; (*) 53.5% fall; (**) able to raise funds from SE despite general decadence! (***) 6 times.

tankers. In Nov. 2008, tankers had a cap. of ~25%, dry cargoes 64% and the rest 11%. Average capitalization fell from $840 m to $280 m.

Important is to stress the impact, on capitalization of the stocks of 25 Greek shipping companies, of the GFC, which was substantial! Their total value, fell, in Nov. 2008, to its 1/3 level of what used to be in 2008 Jan. (within 10 months)! How on earth a shipowner can trust SEs after the end-2008 crisis?

4) The further impacts of end-2008 crisis

Equal important—to the lost capitalization—we believe—is the fact that the listed companies were unable, by majority, to find finance, either from SEs or from banks, during last crisis! This justifies our proposal addressed to shipping companies to maintain a “crisis reserve”, so that to be liquid in times of crisis, retaining profits from good past years.

However, the above proposal may require up to $538 m for each company on average, using end-2008 data! This means, assuming an average profit of $70 m per year per listed company, (estimated from data above), or about 8-yearly profits. Companies with over $180 m p.a. profits, however, may cover the above amount with only 3-yearly profits... Another way to support one’s value of shares, is of course to buy company’s own shares (based on law of demand). But even this, requires liquidity.

5) 2016

In early 2016, (May), 40 Greek companies were recorded in SEs: 2 were ports (Piraeus; Thesaloniki); 1 in yachts (“Kiriacoulis Med.”) (Athens SE); 4 in costal shipping (“Attica Holdings SA”; “Anek Lines SA”; “Minoan Lines” & “Nel Lines”; “Blue Star Mar.” taken-over by Attica); 1 shipyard (“Neorion of Syros”); 1 dealing with rigs (“Ocean Rigs”), and 31 ocean-going shipping companies. We see this time 6 marine companies to be in SEs³⁹.

In more detail: “Navios Holdings” listed-in 3 more companies (“Navios Mar. Acquis.”, “Partners” and “Midstream”). Also, we have 9 more companies: “Box Ships Inc.” controlled by “Paragon” (its stock price was <$1 in May 2016); “Dorian LPG Ltd” (~$18 year’s high stock price); “Dynagas LNG Partners” ($21); “Euronav NV” (new issue at $~17); “Gaslog Ltd” ($~22); “Gaslog Partners” ($~28); “Genco Ship & Trading” ($~8); “Gener8 Mar. Inc.” ($~15); and “Pyxis Tankers Inc.” ($3.37). Eight companies⁴⁰ in 2016 were already listed⁴¹: “Omega”; “Ocean tankers”; “Eagle”; “Excel”; “Oceanaut”; “Hellenic Carriers”; “Aries” and “Oceanfreight”.

6) The international picture, 2016

The situation in June 3^rd, 2016, in global SEs, was as follows (Table 9).

As shown, in 2016, 162 marine companies reached a capitalization of $221 b, against $31 b in mid-1996! This shows an increase of above 7 times in 20 years! The shipping sector, excluding shipbuilding and cruises, had a capitalization⁴² of $94 b in 2016 or ~42.5% of the total (companies noted by (*) in Table 9 plus “Euronav”), against $22.5 b in mid-1996. This is a rise of 4.2 times in 20 years. So, shipping companies found finally their way to SEs, but not all of them. This trend is expected to continue after the Pandemic is over, perhaps in 2022.

7) The top-10 shipping Greek-owned companies listed in 2018

For the top-10 Greek-owned listed shipping companies, 10 years after the crisis, in March 2018 (Figure 3), the picture was as shown.

As shown, the top 10 listed Greek shipping companies⁴³, had a capitalization, in March, 2018, of $~5.4 b, due to the continued crisis of end-2008 extended to 2018.

8) Recapitulation

The progress of the listed Greek-owned shipping companies was positive since mainly 2005, but unfortunately, hit-down by the end-2008 crisis and they did not recover till 2020! (Table 10).

Source: Gong et al., 2006; the last column gave the average capitalization per company over 17 marine sectors⁴⁴.

Source: text.

The serious volatility of shipping NAVs should not lead one to refuse its finance, but it is better to apply visioning and perfect timing⁵²! This is our theory. We will apply visioning for company’s future, but not forecasting, because we consider it to be impossible⁵³, as mentioned (Goulielmos, 2020). For this endeavor, we will apply Chaos Theory (Priesmeyer, 1992: Chap. 8).

Any (shipping) company has a number of structural characteristics, and these are determined by its management, which this way it defines its performance: The structural characteristics for shipping companies, in or opinion, are: 1) the time of buying or ordering ships, 2) the total cost of fleet operation, 3) the type

of chartering (spot or time), 4) the fleet’s gross earnings, 5) the manner fleet financed and 6) liquidity.

Visioning, now, is the process of… defining a company’s future. The state of a shipping company is determined by its (initial) fleet and the forces, which act on it, (i.e., the freight markets⁵⁴). We have, however, to act on these forces to create our visioned condition… First, we need to draw a “phase plane⁵⁵”, and prepare the statistics associated with the company (SPS company) (Appendix). The phase plane (Graph 2) is a (full) Cartesian figure, meaning that we have to use all its 4 quadrants. Also, changes in variables will be used, and not absolute figures (Appendix).

As shown, we plotted the trajectories of the changes of the 2 basic factors of the SPS company, for the last 4 years⁵⁶, 2003-2006 (Appendix): changes in gross earnings (the independent variable) and changes in NAVs (the dependent variable). First, we see something important: company’s trajectories visited the 1 1 3 1 quadrants, meaning a low order chaos (Priesmeyer, 1992: p. 40) (a period-2 limit cycle⁵⁷)!

Because this low order chaos shows a level of stability, banks and SEs must take this into account. This class covers the 2^nd serious percentage of cases (32%). Second, the year gross earnings rose by $3.9 m and by $~5 m from 2003 to 2004, then fell by $~3.1 m in 2005 and rose by $0.53 m in 2006. The company

Graph 2. Visioning SPS company by Chaos theory, 2003-2006. Source: TableA1 in Appendix.

then pursued its vision denoted by the blue dot: i.e., to achieve $30,000/day gross earnings and a $330 m a NAV change in 2007 and in 2007-2009. Can SPS company do that?

Stopford (2009: pp. 325-329) wrote that the gross earnings of the SPS company came from the spot market. This means that the company has immediately to turn to time charters, to achieve this $30,000/day ($10.5 m per year) visioned; this is lower by $1681/day ($~0.59 m p.a.) than the previous year! Management should have realized that spot earnings were falling (as they did: to about $23,000/day in 2005 from $~32,000 in 2004)!

The help of Graph 2 is such that if gross earnings start to fall, it tells us to act fast… to “stop” it. We saw many Greek-owned shipping companies to turn to time charters as market falls… but at their earlier convenience. This turn will provide $3 m for 2007 and 330 NAV, both visioned for each of the next 3 years: 2007-2009.

The above outcome, gives now the company’s visits in 1 1 1 1 quadrants for 2006-2009, meaning period 1 chaos! This is attained by only 4 cases out of 256 in theory. Visioning improved company’s order of chaos! This vision is feasible as company has achieved it 3 times in the recent past (visit in upper right-hand quadrant where both variables rise). Apparently, the company had to find longer time charters than the 3 years we assumed, say another 4 years to pass most of the crisis period of 2010-2022!

Finally, the SPS company failed to achieve a perfect timing in deliveries and purchases of ships—as noted in Figure 7 above. We remind the reader for this important finding using Figure 9. This is a structural characteristic, as mentioned. Moreover, by using gross earnings, we could not take into account the management of operating costs, which is as well one important structural characteristic of shipping companies.

As shown, the best years to buy are eight, indicated by the blue arrows (1977; 1982-1986; 1998; 2001). The years to sell are also shown by the red arrows and are also eight.

Our contribution to the whole issue, which could be titled in a short sentence as: “Shipping Industry in international Stock Exchanges: problems and solutions”, is that there is no other of its kind, giving a historical account of this important step and marking-out the advantages and disadvantages.

More important was, however, to gather data and show what a global financial crisis could do to the capitalization of the companies and particularly of Greek-owned ones, losing 2/3 of their value! Moreover, we provided a lengthy analysis on shipping asset play. In addition, what we consider unique contribution of our work is to show that volatility and cyclicality in shipping sector are a blessing for those who understand shipping, and unfortunately in those are not neither the banks or the Stock Exchanges!

Last but not least we showed that to be in a Stock Exchange as Greeks shipowners did in 2005, massively for the first time, one may lose company’s management! Can one do that if ship-owning and ship-management are a way of life?

We showed that finance/IPOs based on earnings at rock bottom (1977) is safer than that based on top earnings (2004). Our experience from Greek shipowners and SEs tells us that companies, wanting to be listed, have to be trained about it in advance, as they have no previous experience. Important in SEs, no doubt, is the stock price, during an IPO, but also it in the aftermarket. This price may disappoint shipping companies, if it is below their average NAV.

The impact of the GFC-global financial crisis on shipping stocks was detrimental as in Jan. 2008, 25 Greek-owned listed shipping companies capitalized at $21 b and in end-2008 capitalized at $7 b! Thus, they lost $14 b (67%). In a crisis, the risk to be taken-over by another company is very high. This is the main reason for Greek-owned shipping companies not to resort to SEs for finance. Another important disadvantage of SEs is that they ignore the future NAVs of the companies, and their potential asset play. Given the general inability to forecast due to human free will, banks and SEs treat shipping companies unfairly!

SEs provide great services as they transform fixed investments into liquid ones; and in addition, one may change his/her profession at will (Keynes, 1936: chap. 12)… They also protect investors as trading below $1 for 30 consecutive trading days is not allowed; 7 Greek shipping stocks reached this in 2016. When companies hit the low limit of the stock price of $1, they decide to split⁵⁸ their shares to regain compliance. “Hellenic C” joined “Goldenport” abandoning SE, due to the costs of being listed.

Banks, no doubt, dominate as a source of finance to Shipping Industry. Unfortunately, both banks and SEs are apparently unfamiliar with Shipping Cycles and Volatility! This lack of familiarity with cycles, and volatility, transforms, at times, we believe, banks and SEs investors from yesterday’s enthusiastic partners to present day bitter opponents!

The end-2008 period provided a good opportunity for those having the funds, to buy a few—most profitable—shipping companies, at 1/3 of their previous and very recent value! This means that companies have to maintain higher than hitherto depreciation rates and to distribute lower dividends... so that to build crisis reserves as a recession starts. A crisis will oblige one to resort to them again, but what if they refuse to give, confused by volatility and not understanding the asset play using ships?

The author declares no conflicts of interest regarding the publication of this paper.

Goulielmos, A. M. (2021). To Be or Not to Be Listed? A Dilemma of the Greek-Owned Cyclical Shipping Companies. Modern Economy, 12, 401-428. https://doi.org/10.4236/me.2021.122021

Source: Data from Stopford (2009): SPS Co.