Corporate Governance IssuesIs anything hidden in the latest announcements or news?Long History of diluting its shareholders.Today, we take a look at Dryships (DRYS) as our Wild Tiger stock feature. The stock is down 99.9% from just 1 year ago. However, the stock has been trying to hold its own in the last few months. Getting some traction after announcing a dividend and authorizing a $50M stock buyback program in early February. As I will point out below, do not count on this. It appears this company receives very little in the way of analyst coverage as it could be considered a risky penny stock. Let's take a look at this shipping play.(Chart courtesy of StockCharts.com)Company Overview: DryShips Inc. owns and operates ocean going cargo vessels worldwide. The company currently has a market cap of $410 million and trades at $3.94 a share. Earnings were last reported on February 27th.Corporate Governance Issue: Dryships founder and CEO George Economou has treated this company as his own personal piggy bank. As the stock continues to sink and drift away, good old George has still made money. He profits as companies that he privately owns earn fees for managing the Dryships fleet. Economou is making millions from this arrangement. How is this possible? He controls almost all of DryShips via preferred stock and completely runs the company through his founder and CEO roles. There are no checks or balances placed on him. There is nothing to stop him from bleeding investors dry with one dilutive offering after another. Offerings that are used to buy more ships, which in turn earns himself more fees. Last year the company amended its SEC Form 20F-A reiterating the fact that it is a foreign issuer.Under section 16G Corporate Governance the company states; "As a foreign private issuer, we are subject to less stringent corporate governance requirements than U.S.-domiciled companies."As such, the company doesn't need shareholder approval to issue new securities or the adoption of equity compensation plans.Tearing down the February 7th dividend and stock buyback announcement: In the press release, the company declares a $2.5 million dividend, equating to $0.024 a share. They authorize a $50 million stock buyback program. But wait! The company states in the release it expects to finance the stock purchases with its existing cash balance. According to their latest earnings report, they stated cash and cash equivalents of approximately $41.0 million at the end of the year. So how can they pay for the buyback?Tearing down the 4th Quarter earnings released on February 27th: In the press release, the Company reported a net income of $11.5 million, or $0.11 basic and diluted earnings per share. But wait! That included net income associated with “mark-to-market” accounting of the Company’s 49.0% ownership in Heidmar Holdings LLC, a global tanker pool operator. This accounted for $9.7 million, or $0.09 per share. Also included, was a gain on the sale of the company’s Panamax vessel, the Ecola for $4.4 million, or $0.04 per share. So the company then states: "Excluding the above, the Company’s net results would have amounted to a net loss of $2.6 million, or $0.02 per share." Losing money and seeing any mention of "mark-to-market" accounting is worrisome to me.History of Diluting its shareholders: What investors need to stay concerned with is the history of DryShips' reverse stock splits. During 2017, those splits amounted to a 1-for-7,840 ratio! That is massive dilution which helped lead to the 99.9% drop in the stock price that year. The reason for these splits? DryShips management (Economou) wanted to sell shares in an effort to raise $720 million to purchase 17 new ships for its fleet. Also troubling, the new equity received the attention of the SEC, which issued them a subpoena. It seems a little known entity called Kalani Investments was both the buyer and seller of new shares being created. Kalani failed to register as an underwriter with the SEC leaving some to speculate if this was an illegal capital-raising scheme.In December of 2016, Economou acquired most of DryShips' outstanding debt. After a short time, the company announced a new $100 million financing which diluted shareholders and raised the share count to 33.8 million from 1.1 million. On December 15th, DryShips announced a refinancing that included increasing the company’s credit facility to $200 million. It also included a $33.5 million payment to Economou! A few weeks later, DryShips announced a new contract option to purchase 4 VLGC ships at a potential cost of $334 million. But Wait! Those 4 ships were being purchased from companies privately controlled by Economou! "Under the new VLGC agreement, DryShips would buy a series of Panamax LPG carriers from the Economou-owned management firm TMS Cardiff Gas." Were the prices on those ships favorable for Dryships or for Economou himself?Final Thoughts: Considering the company is continually losing money how can they maintain a dividend or complete a share buyback? If you take into account for reverse splits this stock was worth over $5,000 a share a year ago. If you go back to early 2014, a whopping $136 Million per share!(Chart courtesy of QuoteMedia) And if you go back even further, to say its peak share price in 2008, $3 Billion a share! That is a capital B for Billion.(Chart courtesy of SeekingAlpha.com) It seems very clear that DryShips has not created any value for its investors. It seems the company's sole purpose may be to enrich Economou at the expense of shareholders. Questions to ask yourself if thinking about buying this stock: Will there be more shareholder dilutions in the future? Can you tolerate a high level of risk in this name? To me the risk/reward ratio tells me to avoid this company. Could this just be a big scam?The previous DRYS Shareholders (a.k.a. bagholders) may be depicted in the photo below.Disclosure: My articles represent my personal opinion and analysis and should not be taken as investment advice. Readers should do their own research before making decisions to buy or sell securities. Trading and investing include risks, including loss of principal. If you liked this article, please click the like (thumbs up) button. Feel free to leave any comments and follow us.