Market Insider

Small-cap shipping shares are surging, led by Greek firm DryShips

Shipping containers and a cargo ship are seen at the Port Jersey Marine Terminal.
Craig Warga | Bloomberg | Getty Images

The U.S.-traded shares of micro-cap stock DryShips spiked a staggering 64 percent in pre-market trade before being halted Wednesday, adding to an explosive surge that began last week.

At the beginning of the month, the company implemented a reverse stock split in which every 15 shares of the firm's issued common stock was combined into one issued share of common stock, reducing the number of such shares to about 1.1 million from more than 17 million, according to a press release.

Shares of DryShips are up more than 1,300 percent over the last 5 trading days, but are down 72 percent for the year so far.

Trade in DryShips shares was still halted in Wednesday afternoon, while shares of other very small shipping stocks were up significantly in midday Wednesday trade.

Michael Webber, senior analyst and managing director for equity research at Wells Fargo Securities, attributed the sharp moves to several factors.

"We think this micro-cap outperformance started with a thematic, risk-on Trump rotation, followed by retail momentum and [multiple] short squeezes, with an ever increasing push from quant driven momentum," he said in a Wednesday note. He said he expected the stocks to likely retain a small part of their gains "as longer-term prospects have likely improved to at least some degree."

A short squeeze occurs when traders buy back shares to exit short positions, or bets of a share price decline.

DryShips year-to-date performance

Short interest in DryShips was 11.7 percent of shares available for trading, according to FactSet.

Nasdaq halted the stock pending a request for more information. Nasdaq declined to comment further to CNBC on the stock halt. DryShips' New York investor relations did not immediately respond to CNBC's request for comment.

DryShips is based in Athens, Greece, and had a market capitalization of less than $80 million as of Tuesday's close.

On Nov. 9, DryShips reported a $7.70 diluted loss per share for its third quarter.

Shipping stocks soar

Other very small shipping stocks on the move Wednesday as of 1:15 p.m., ET, included Sino-Global Shipping America, whose shares had surged more than 150 percent, and Diana Containerships, whose shares had briefly leaped 200 percent. Euroseas shares were about 34 percent higher. All three stocks had market capitalizations of less than $60 million as of Tuesday's close.

Shares of Eagle Bulk Shipping, which has a market cap of about $400 million, were well off highs, about 2.5 percent higher.

Wells Fargo's Webber has an "underperform" rating on Diana Containerships and "market perform" rating on Euroseas.

Clarification: This story has been updated to more accurately reflect the stocks' small market capitalization.