Imperial Petroleum Series A Preferreds: Solid, But Not A Bargain Anymore - Hold

seekingalpha09-14

Imperial Petroleum's solid financial results and pristine balance sheet warrant a closer look at the company's 8.75% Series A Cumulative Redeemable Perpetual Preferred Shares.At Friday's closing price...

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HeliRy Note: I have covered Imperial Petroleum Inc. or \"Imperial Petroleum\" (IMPP), (NASDAQ:IMPPP) previously, so investors should view this as an update to my earlier articles on the company. A couple of weeks ago, Greece-based tanker and drybulk vessel operator Imperial Petroleum reported solid Q2/2024 results with stable fleet utilization and decent cash generation:   Company Press Releases According to management's statements in the earnings press release, the company's cash balance had increased to almost $190 million by the end of August. Imperial Petroleum continues to have no debt. While typical seasonality in the tanker market is likely to result in a weaker third quarter, the company should still generate healthy cash flows. Imperial Petroleum's pristine balance sheet and solid profitability warrant a closer look at the company's 8.75% Series A Cumulative Redeemable Perpetual Preferred shares. Yahoo Finance Following a massive rally in the first half of the year, the company's preferred shares are currently trading around their $25 liquidation preference. At Friday's closing price of $25.12, annualized yield calculates to 8.72%. While certainly not bad, particularly when considering expectations for substantially lower interest rates going forward, I wouldn't chase the preferred shares at prevailing prices due to a number of issues:  Average daily trading volume is below 2,000 shares, thus resulting in large bid/ask spreads. The company has the option to redeem the preferred shares at any time, which could result in capital losses for investors who bought the shares above their $25 liquidation preference. There are a number of alternatives issued by larger shipping players with similar or even higher yields and often better trading volume.  Yahoo Finance Remember also that Imperial Petroleum has a history of pursuing growth at the expense of common shareholder dilution, with the majority of the company's current fleet acquired through related party dealings from entities affiliated with CEO and Chairman Harry Vafias. However, common shareholders' pain has been preferred shareholders' gain as Imperial Petroleum used the funds to build a profitable fleet of tankers and dry bulk carriers with an estimated value of more than $300 million while at the same time accumulating plenty of cash on its balance sheet. Company Press Releases With preferred stock dividend obligations covered multiple times by operating cash flow, Imperial Petroleum's preferred shares remain a solid \"Hold\" position. Bottom Line Given Imperial Petroleum's pristine balance sheet, strong liquidity and substantial cash generation, the company's 8.75% Series A Cumulative Redeemable Perpetual Preferred Shares continue to be an option for income-oriented investors but with annual yield now at levels in line or even below preferred stocks issued by much larger industry players, I wouldn't chase the shares at current prices.  As a result, I am reiterating my \"Hold\" rating on the shares.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2467062786"}