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John Fredriksen-backed Flex LNG makes Spotify-style NYSE debut

Shipping magnate John Fredriksen. Photo courtesy of Chris Preovolos/Marine Money

The New York Stock Exchange (NYSE) has just welcomed another ship owner aboard.

On June 17, the stock of liquefied natural gas (LNG) carrier owner Flex LNG (NYSE: FLNG) began trading in the U.S. Its executives rang the opening bell and the stock closed up 2 percent on its debut day. Flex LNG had been previously listed on the Oslo stock exchange; it will now be dual-listed.

There has not been a U.S. initial public offering (IPO) by an ocean shipping company since June 2015, due to a lack of investor interest. Ship owners are sidestepping this hurdle by doing so-called ‘direct listings,’ a concept popularized by Spotify (NYSE: SPOT), in which the stock begins trading but no money is raised.

“With the direct listing, we did not have any underwriters or any financial advisors, just some lawyers filing the registration statements. It has been a swift process for us to get on the stock exchange in the U.S.”

Oystein Kalleklev, CEO, Flex LNG

Speaking at the Marine Money conference in New York on June 17, Flex LNG chief executive officer Oystein Kalleklev highlighted the relative speed, cost and ease of the direct listing process versus an IPO.

“With the direct listing, we did not have any underwriters or any financial advisors, just some lawyers filing the registration statements. We did a confidential filing with the SEC [U.S. Securities and Exchange Commission] in April. They didn’t have many comments, and we did a public filing in May, and now we are trading in June – so it has been a very swift process for us to get on the stock exchange in the U.S.”

The company’s largest shareholder is billionaire shipping tycoon John Fredriksen, the richest man in Norway. Other Fredriksen-backed public shipping companies include Frontline (NYSE: FRO), Ship Finance International (NYSE: SFL) and Golden Ocean (NASDAQ: GOGL).

Flex LNG raised $329 million through an equity private placement in 2017 and another $300 million in an equity private placement last year. “We did not really need to raise any more equity [through a U.S. IPO],” said Kalleklev, adding that the Spotify direct listing provided the “blueprint.”

The company has four LNG carriers that were built in 2018, another newbuilding that delivered this month, another to be delivered in August, five newbuildings scheduled for delivery in 2020, and two for delivery in 2021, for a total initial fleet of 13 LNG carriers.

The ships it has on the water are on “fairly short-term contracts,” he explained. Management believes that “the market is gradually tightening and there will be better opportunities for longer-term charters down the road.”

He said that the LNG shipping market has evolved from one that was almost exclusively based upon very long-term charters that supported bank financing to a market featuring much shorter contracts. Given that shorter contracts will not secure the same level of debt financing, he said that the new incarnation of LNG shipping will require more equity financing.

The arrival of Flex LNG marks the third ship owner to secure a U.S. listing this year, despite the dearth of IPOs. Diamond S Shipping (NYSE: DSSI) did a direct listing in March and Castor Maritime (NASDAQ: CTRM) listed in February. At least one more is in the queue – Golar LNG (NYSE: GLNG) has confirmed definite plans to spin off its LNG shipping division from its other businesses.

Two public companies have announced intentions to privatize and withdraw from the public market in 2019 – DryShips (NASDAQ: DRYS) and Teekay Offshore (NYSE: TOO) – but overall, the total number of listed ship owners continues to rise.

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Greg Miller

Greg Miller covers maritime for FreightWaves and American Shipper. After graduating Cornell University, he fled upstate New York's harsh winters for the island of St. Thomas, where he rose to editor-in-chief of the Virgin Islands Business Journal. In the aftermath of Hurricane Marilyn, he moved to New York City, where he served as senior editor of Cruise Industry News. He then spent 15 years at the shipping magazine Fairplay in various senior roles, including managing editor. He currently resides in Manhattan with his wife and two Shih Tzus.