2022 is rapidly ending without a single mainstream shipowner being able to complete a conventional IPO in the US. This makes 2022 like most recent years. Except for Israeli liner operator Zim in January 2021, no mainstream shipowner has been able to float in New York since Peter Georgiopoulos and the old Gener8 Maritime pulled the trick in June 2015. But while the front door to the IPO market has been virtually locked for shipping, the back door to a public listing has been wide open. Bankers at New York’s Maxim Group have been like traffic police windmilling a line of eager shipowners right on through it. The latest to give notice it will use the listings loophole is Cyprus-based Castor Maritime, which plans to spin off eight tankers from its fleet onto the Nasdaq under the name Toro Corp. As a footnote, Castor itself did not come public through a conventional IPO. It opted for what is called a direct listing of shares on Nasdaq in 2019 without raising any new funds. Castor was previously on the Norwegian over-the-counter exchange. With help from Maxim-led shares sales, Castor has been a remarkable success in some respects. Between its launch in 2019 and December 2021, Castor spent nearly $400m on secondhand tonnage in deals that vaulted it from one ship to 29 vessels, 20 bulkers and nine tankers. But like most of the Maxim-related shipping deals, Castor hasn’t been such a success for retail-oriented investors who decided to buy its shares.

With a current stock price near $1.45, it has lost nearly 98% of its share value from a split-adjusted price of $71 per share on 11 February 2019. Most of the dilution came from heavily discounted sales of common shares packaged with warrants, as has been the style for other Maxim-connected companies such as Performance Shipping, StealthGas spinoff Imperial Petroleum and Diana Shipping spinoff OceanPal. In the case of the new public companies created by spinoffs, they generally would have little chance of floating in a regular-way IPO for a variety of factors, ranging from size to governance to general investor attitudes about shipping.

Such is quite likely the case with Toro, which brings just eight tankers averaging 17.5 years of age into the transaction. On the other hand, Castor’s timing appears deft. It would already have seen the tanker values appreciate from their 2021 acquisition, and most observers feel the gathering tanker bull market has some ways to run, fueled partly by tonne-mile dislocations from Vladimir Putin’s war on Ukraine. But the offspring company inherits another feature from its parent: control through super-voting rights rather than insiders’ skin in the game through significant ownership of common shares. For example, Castor has more than 94m shares outstanding. Chief executive Petros Panagiotidis holds only 112,409 of them, or roughly 0.12%. No insider or director holds more than 1% of shares, nor does the officer-director group collectively, according to public filings. Yet Panagiotidis also owns 12,000 Series B preferred shares, representing all the shares of that class. Each preferred share has the voting power of 100,000 common shares, giving him voting control of the company. Why is that significant? When regular shareholders suffer dilution from equity raises, insiders suffer little or no economic handicap from their decision to issue stock.

Toro has not begun trading yet, but a public filing suggests a similar structure. Toro has 38.7m shares outstanding. Panagiotidis owns 44,963, or 0.12%. All officers and directors collectively hold no more than 1%. Panagiotidis owns all 40,000 of the preferred shares outstanding, and each carries 100,000 votes. With common and preferred shares combined, Panagiotidis controls 99.1% of the vote. One other thing held in common by the Maxim-linked companies is that they typically go to great lengths to disclose the risks involved for investors. In that respect, Toro says the following: “We are a new company, and our anti-fraud and corporate governance procedures might not be as advanced as those implemented by our listed peer competitors having a longer presence in the shipping industry. As a publicly traded company, the SEC [US Securities & Exchange Commission], Nasdaq Capital Market and other regulatory bodies subject us to increased scrutiny on the way we manage and operate our business by urging us or mandating us to a series of actions that have nowadays become an area of focus among policymakers and investors.” Listed companies are “occasionally encouraged” to follow best practices in areas such as director independence, board committees, corporate transparency, ethical behavior, corruption control and sustainability, the company goes on. “While we believe we follow all requirements that regulatory bodies may from time to time impose on us, our internal processes and procedures might not be as advanced or mature as those implemented by other listed shipping companies … which could be an area of concern to our investors and expose us to greater operational risks.”