The Debt Spiral Around Scorpio Bulkers Inc (NYSE:SALT) Grows Deeper And Deeper

[[tagnumber 0]][[tagnumber 1]]It has been two weeks since the stock of Scorpio Bulkers Inc (NYSE:SALT), a marine transportation company, crashed big time following a share offering announcement. As it seems, the hit now seems likely to have a lasting effect on the market value of SALT for a while.[[tagnumber 2]] [[tagnumber 0]]On June 9, 2015, Scorpio announced plans for the public sale of up to $200 million worth of stock to help finance its newbuilding program encompassing the construction of 63 dry bulk vessels of different categories. The Underwriting agreement would later reveal a public offering price of $1.50 per share and a total of 133 million shares of common SALT stock avaiable for sale. As a result, SALT shares went down 10% and 26% on June 9 and June 10, respectively, thus going from $2.42 to $1.60, which marked a 34% depreciation, in just two days of trading.[[tagnumber 2]] [[tagnumber 0]]As it is, this was not the first time the company‘s shares had experienced a flop of this scale. In late–January, SALT tumbled to $1.30 per share, a 52–week low. Not coincidentally, this fall had been caused by a similar trigger point – the incurring of new debt, this time in excess of $400 million. Altoghether, SALT‘s external capital acquired within the first half of 2015 through both debt and equity financing is expected to surpass the $600 million mark. Why is the company‘s management so actively seeking outside financing opportunities, though?[[tagnumber 2]] [[tagnumber 0]][[tagnumber 8]]While SALT does need fresh capital to keep its newbuilding program up and running, it is essential that this program lead to new cash flows in the mid–to–long term. In the light of the Q1 2015 report, the latter need substantial improvement since the company‘s net result for the first three months of 2015 is a loss of some $52 million while the revenue stands at some $12 million. Scorpio‘s cash reserves have also dwindled dramatically from $273 million as of Dec. 31, 2014, to $147 million a/o Mar. 31, 2015. Nevertheless, SALT‘s net working capital exceeds $240 million, which makes the business solvent enough to pay out its everyday bills.[[tagnumber 2]] [[tagnumber 0]]However, a situation in which the business is both solvent and unprofitable at the same time cannot exist forever. What is more, the total value of Scorpio‘s forthcoming instalment payments for its newbuilding program well exceeds $1 billion and the company is scheduled to pay out this amount in instalments by Q3 2016. In this respect, the question as to where the money necessary for the settlement of this program will come from remains pending. Considering how the company‘s revenues have been developing so far, it seems safe to assume that SALT could not rely on them alone to finish off the program.[[tagnumber 2]] [[tagnumber 0]]At present, SALT shares are traded around the $1.80 mark, which is exactly 81.5% away from their 52–week high of $9.09 per share registered in early–July last year. Does Scorpio‘s management have what it takes to help the stock at least partially recover? The stock‘s performance in the coming months will give us a clue about that.[[tagnumber 2]]