GMR Emails 2-25-09 2 parts

To: Friends and Family
Subject: GMR earnings tonight; Price below $10 again

Email 1

GMR announces its 4Q 2008 results which will have a few days worth of the Arlington acquisition too, tonight...should be interesting. I have heard a few of the other oil tankers have dropped their dividends, but those ones have been also been a lot more overvalued from a share price perspective and the announcements came months ago. No such announcement yet on GMR. From a Free cash flow perspective this thing is still spitting out over $150MM of EBITDA/year with interest expenses of $27MM; so over $100MM of pure cash a year to do as it pleases on 31MM shares ($3.00+/share/year). The stock is currently tanking hard today on very light volume (giving up all of its gains yesterday) which makes me happy because I am going to put in a little slug of shares sometime today before the earnings call. These numbers are all pre acquisition, but should be similar in nature pro forma for Arlington.

If they don't cut their dividend today, then I don't see them doing it anytime. Now is the time to cut since everyone else is. So today is D-Day so to speak.

I expected a final move down, and am getting it. I think it could still fall farther as oil falls below $35 again and the market makes a new low, but I don't want to miss out in case they do have a great quarter. Being a long term investor we have the luxury of being early. With that, I am adding a little whip cream to my existing slice of pie.

I will try to send out the updated model thursday/this weekend. Good Luck,

Email 2
One other thing I just noticed too is that the company has recently registered to file $500MM in a secondary share offering. At first thought, this is not a good thing. Why would they be willing to sell $500MM worth of shares while the stock price is at a multi year low? Sounds like GE when they were buying back shares at $30 and then recently issued shares at $15...losing $15/share in cash

I am going to assume the purpose is to pay down debt, which is arguably a decent thing to do in these times, but I would counter argue that when their debt is at a very low rate of like 5% doing so may not be prudent. Also, they could easily pay down $50-$100MM/year using free cash flow. Just doesn't make sense. Notice too that the offering never hit the news wires. I found it on the SEC website. Perhaps they are going to continue to be acquisitive as well...who knows. Tomorrow we find out.

I am on guard though and may reverse the purchase I just made to wait and see.

This call tomorrow will be interesting. It is at 10am central.