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Box Ships Inc (OTCMKTS:TEUFF) Capturing Investor Attention Again

Box Ships Inc (OTCMKTS:TEUFF) Capturing Investor Attention Again
Written by
Jarrod Wesson
Published on
October 30, 2017
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Something seems to be going on with Box Ships Inc (OTCMKTS:TEUFF), the international shipping company. In October, the company captured Wall Street's attention as the amount of shares being exchanged increased quite a bit. Company LogoMore than ten million shares were bought and sold some days. Have a look: 2 months chart for TEUFFBusinessBox Ships Inc was created on May 19, 2010. It was founded by Paragon Shipping Inc. (OTCMKTS:PRGNF) to own and operate containerships and pursue containership acquisition opportunities. An IPO was executed in April 2011.In 2016, the company had to deal with lenders after failing to comply with several agreements signed with them. Thus, a restructuring process commenced, under which the company sold several subsidiaries owning vessels. Additionally, all remaining assets and liabilities were transferred to the CEO, Mr. Michael Bodouroglou. According to the company materials, TEUFF was released from its obligations with debt holders.The year 2017 seemed to commence well. On December 1, 2016, the company signed commercials services agreements with ship-owning companies affiliated with the CEO. We believe that TEUFF owns know how and expertise in the industry and will help the company sign agreements with new operators.The most important asset in the company seems to be the talent of the CEO, Michael Bodouroglou, who has worked in the industry for many years. He created another company in 2000 called Allseas, a Liberian corporation, which provided commercial and technical management services to TEUFF's fleet. Subsidiaries of the company and Allseas had signed long-term management agreements. Furthermore, another company called Seacommercial, based in Athens, Greece, was also founded by Mr. Bodouroglou and also provided services to the company.We could read in the company materials that the responsibilities of Michael Bodouroglou are extensive. The following are some of them:

  • Commercial and technical management of the company's vessels
  • Technical management services
  • Managing crews, vessel maintenance

Furthermore Allseas also worked for other companies in the industry, such as Paragon Shipping Inc. (OTCMKTS:PRGNF). In the last annual report, it was noted that this company had established a reputation in the international shipping industry for "operating and maintaining a fleet with high standards of performance, reliability, and safety."What's going on?As other market participants claimed on the iHub Forum, we also believe that there is war inside the company. In April 2016, Stephen M. Chu acquired 8.23% of the total outstanding shares of the company. He noted that his behavior as shareholder was going to be "passive." However, in the following months, the market could see that he is behaving more like an activist.On April 19, 2017, the Board of Directors noted that a new Shareholders Meeting was going to be celebrated on May 31, 2017. The meeting was announced for several purposes, but the most significant proposal that was going to be voted was:

"Giving grant discretionary authority to the Company’s board of directors to execute 1-for-2 up to 1-for-1,000 (the “Reverse Stock Split”)" Source

On May 31, 2017, the company released that the annual meeting of shareholders had been adjourned until June 15, 2017. It was actually that day that we decided to follow the company. When shareholders meeting is postponed in this way, it usually means that shareholders are negotiating something and more time is needed.Furthermore, on June 15, 2017, another filing was released highlighting that the annual meeting of shareholders had been adjourned until June 23, 2017. Again, we believed that some shareholders were trying to convince other holders and more time was needed.On June 23, 2017, we could read that the annual meeting had been adjourned until July 14, 2017. Finally, on July 14, 2017, it was noted that the reverse stock split had not been approved:

"At the Annual Meeting, the proposal related to the approval of discretionary authority to the Company’s board of directors to amend the Company’s Articles of Incorporation to effect a reverse stock split, which was set forth in more detail in the Notice of Annual Meeting of Shareholders and the Company's Proxy Statement sent to shareholders on or around April 21, 2017, was not approved." Source

What's our take?We believe that Stephen M. Chu pushed shareholders to vote against the reverse stock split proposal. We appreciate his actions, as, in our opinion, a reverse stock split would hurt shareholder value.We believe that the company needs to work on other type of activities to create value in the long term. Focusing on the business and letting the market push up the share price is the right way to proceed.ConclusionCurrently trading with a market cap of $0.36 million, TEUFF is an exciting story among small caps. With $2.8 million in assets and $2.6 million in total liabilities, we believe that the company will need new financing soon. In our opinion, the accumulated expertise of the CEO will help raise capital, thus it will not be a problem.We appreciate that Stephen M. Chu is advocating for shareholder's interests. He seems to be defending small shareholders, which will be good for future value creation. We believe that the worst is behind TEUFF and better days are ahead.We will be updating our subscribers as soon as we know more. For the latest updates on TEUFF, sign up below!Image courtesy of Macarena Rivera via FlickrDisclosure: We have no position in TEUFF and have not been compensated for this article.

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