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I have tried to see if someone here is following Euroseas but have failed to find some interest in it.

Nothing strange with this since the stock has been doing nothing but go down in the past years.

If anyone has followed the story though, it might be interesting to notice what is happening with this company.

The original owners (the Pittas family) made the IPO in 2005 pricing the shares at 15 dollars. Later the company did a successful secondary offering at 18. This fact is important since they are now being able to re-purchase their shares at 1/15 of the price they got originally.

The stock went up until hitting 21 per share and then it zigzagged with a downtrend until reaching the low 3's early this year.

The company has been lowering its dividend all along although has not stopped paying one every quarter.

The debt level is good and the administration costs (provided by a company who is owned by the Pittas) are lower than the industry average.

The Pittas family still held almost 37% of the shares as of early this year. They had been buyers of around 1 million shares during the past year according to the SEC filings (buying at between 3 and 4 dollars per share).

In April an institutional investor dumped almost 1 million shares which put pressure on the stock which saw its price go down below 2 dollars a share.

In May, the board of directors announced a rights offering for shareholders on record, for almost 14 million shares (there were 31 million shares outstanding before the offering). In the offering, the board indicated:

1. That the company was not doing the offering because it needed the cash. They showed a balance of 35 million to prove their point.

2. That the reason for the offering was that they were looking at very good investment opportunities in the market at very good prices and that they would use the proceeds mostly to take advantage of them.

3. That the Pittas family would not only participate in the offering with their 37% share holdings but would also participate in the over subscription rights (meaning they would buy the shares if other shareholders decided to not participate in the offering), this meant that the offering would not go to the open market.

4. That the offering would not be dilutive to shareholders participating in the offering (of course it would be if you were not participating).

The offering went ahead as planned and the company announced on Tuesday that the rights offering was oversubscribed and that the company would be getting the funds that they anticipated (14.9 million).

Now, here are my thoughts, please someone tell me if I am only wrong or very wrong.


1. If you take the fleet of the company and scrapped ALL the ships, taking out any value of their charters, and you added their cash and took out the debt, you would get more than 1.20 per share.

2. The company is participating in a joint venture called Euromar in which the company holds a 14% interest. This company has been actively buying containerships at very good prices. This is an added value that can't be discarded.

3. The question that I had been asking myself for the past several months was why the Pittas family stopped buying more shares. In my opinion the rights offering got me the answer. By doing this offering they would not only be able to increase their shareholdings (since they knew that many shareholders would not participate in the offering). I have information that the Pittas family managed to increase their ownership from 36.7% to almost 44% after the offering, meaning they managed to buy an additional 3.2 million shares at a 1.10 price per share (the offering price). They not only managed to buy this amount of shares without making the price increase significantly had they done so in the open market but the money they paid went directly into the companies bank account (a much better scenario than having to pay this money to some outside shareholder of course). I like this and think it is positive for shareholders, and of course, more so for the Pittas family.

I have heard the conference calls for the past 3 years and I really think these people know about this business. The Pittas family has been in this business for 4 generations and the background of Mr. Pittas is clean and shows he knows how to run the business. The CFO is very straightforward in the conference calls and they don't paint a bright picture to push the stock price. In 2007, when the prices of containerships were sky high, the company avoided buying any ships at those prices, indicating they were unreasonably high and they even sold a couple of them in that period.

I did participate fully in the rights offering and I might have done a very irresponsible thing. Euroseas is now 29% of my portfolio, which I never intended to have in any particular stock.

The valuation, in my mind gives a very strong argument for a value of at least 3 dollars per share if one takes today's very low prices (this is if you consider the actual market prices of the ships today, and not as scrap).

The real question is if the company will be able to survive if the prices for both drybulk and containerships keep going down.

I believe that many shippers will go broke, if this is the case, especially those with very high debt levels.

I believe that Euroseas has a very strong position and should be able to survive even if this low prices stay here for a couple of years.

Does any one care to comment?


Juan Carlos Camacho.
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