(Updated as of March 12, 2024)
Strategic Rationale
- Why did Diana Shipping distribute warrants to purchase Common Shares?
The Company has a policy to uphold a robust balance sheet through proactive management of our capital structure. Through this pro-rata warrant distribution, Diana Shipping may raise new capital to maintain our robust balance sheet while protecting all shareholders, large and small, from dilution. All our shareholders receive the opportunity to either increase their investment in the Company or to sell their warrants for cash. This distribution underscores the inherent strength the Board and management see in Diana Shipping and the confidence they have in the Company’s potential to deliver long-term profitable growth.
2. Why did Diana Shipping do this in December 2023?
This distribution of warrants was a way to raise equity capital through the exercise of warrants, without diluting shareholders who chose to participate. Diana Shipping has consistently taken action to optimize its capital structure to deliver potential value for all shareholders. Diana Shipping will continue to execute on the opportunities that are designed to deliver the best value enhancing opportunities for shareholders.
3. Is this distribution dilutive to shareholders?
This is a pro-rata warrant distribution that is not dilutive for holders of the Company owning five or more of the Company’s Common Shares as of December 6, 2023 (the “Record Date”). It is not dilutive for any shareholder who chooses to exercise their warrants early during the Bonus Share Fraction period.
4. Was there any cost to shareholders, or any cash payment required from shareholders, to receive the warrant distribution on the payment date?
No, the warrants were distributed to all shareholders at no cost.
5. What will Diana Shipping do with the cash proceeds from the exercise of the warrants?
Diana Shipping intends to use the cash proceeds from the exercise of the warrants for general corporate purposes.
6. How will shareholders benefit from this warrant distribution?
Diana Shipping distributed warrants to all shareholders. The warrants are listed on the NYSE and are expected to have a value as determined by the market. Shareholders benefit to the extent of the market value of the warrants if they sell their warrants for cash and/or will have the opportunity to increase their investment in the Company through exercise of warrants.
7. What warrant ratio did shareholders receive for their investment stake?
Shareholders received one warrant for every five Common Shares held as of the Record Date, with fractional warrants rounded down. As a result, shareholders who own fewer than five shares were not entitled to any warrants.
8. Will the exercise of the warrants result in the issuance of additional Common Shares?
We did not issue any Common Shares directly in the warrant distribution, but will issue Common Shares upon exercise of warrants. Based on the number of Common Shares outstanding as of the Record Date, if all of the approximately 19.6 million warrants in issue on March 12, 2024 (as a reminder approximately 22.6 million warrants were originally issued in this distribution) were exercised and the maximum number of Bonus Share Fractions (described below) are issued, this would result in the issuance of up to approximately 30.2 million (*)(**) Common Shares. Shareholders who choose to exercise during certain periods will receive an additional 0.51292 (*)(**) of a Common Share, without any additional cost (the “Bonus Share Fraction”). As of March 12, 2024, approximately 3.0 million warrants have been exercised, resulting in the issuance of approximately 4.5 million Common Shares.
Details of Warrant Distribution
9. Did all shareholders of record automatically receive the warrants? When were the warrants issued?
Yes. All holders as of the Record Date received warrants in the amount of one warrant per every five Common Shares, rounded down for any fractional warrant, so holders of fewer than five Common Shares did not receive a warrant. The warrants were issued to holders of Common Shares on December 14, 2023.
10. Did shareholders have to do anything in order to receive the warrants?
No. All holders of record of at least five Common Shares as of the Record Date automatically received the warrants in book-entry form on December 14, 2023. If you hold your shares through a brokerage account, bank or financial institution and are thus a holder in street name, contact your broker for further information. If your shares are held in a registered account with Diana Shipping Inc.’s transfer agent, contact Client Services at Computershare Trust Company, N.A. 150 Royall Street, Canton, MA 02021 for further information.
11. Can I sell the warrants?
The warrants are transferable and are listed on the New York Stock Exchange, although we cannot provide any assurances that an active trading market for the warrants will develop or continue or that there will be liquidity in the trading market for the warrants, or the price at which the warrants will be able to be resold. You should consult your financial advisor or broker for assistance.
Details of Warrant Exercise
12. When can I exercise the warrants?
The warrants became exercisable on the date of distribution and can be exercised until the earlier of (x) the Expiration Date, which is 5:00 p.m. New York City time on December 14, 2026 and (y) 5:00 p.m. New York City time on the Business Day prior to the date set for redemption.
13. What is the exercise price? How do I pay? How will the warrants be settled on exercise?
The exercise price of the warrants is $4.00 per warrant, which is the amount required to be paid in cash to exercise the warrants and receive Common Shares.
Common Shares issuable upon exercise of warrants are expected to be delivered to the applicable holder of record as soon as commercially practicable after the date on which the holder exercises their warrants. We note holders may not receive the shares within the typical two business day settlement after exercise of their warrants.
14. What is the purpose of the Bonus Share feature?
The purpose is to allow shareholders who choose to exercise early, during certain periods, to receive an additional 0.51292 (*)(**) of a Common Share without any additional cost, and to allow shareholders who do not choose to exercise during these certain periods to continue to hold their warrants through the earlier of the redemption date or the expiration date.
15. How many Common Shares will I receive upon exercise?
Upon exercise of each warrant, you will receive 1.02584 (*)(**) Common Share, plus, during the Bonus Share Period, an additional 0.51292 (*)(**) of a Common Share, which we refer to as the Bonus Share Fraction.
If you exercise your warrant after the Bonus Share Period, you will receive 1.02584 (*)(**) Common Share upon exercise of each warrant.
The Company will not issue fractional Common Shares or pay cash in lieu thereof. If you would be entitled to receive a fractional number of Common Shares upon exercise of the warrants, the Company will round down the total number of Common Shares to be issued to you to the nearest whole number. The Company’s calculation shall be determinative.
16. When does the Bonus Share Period begin and end?
The Bonus Share Period began on the distribution date of the warrants and will expire at 5:00 p.m. New York City time (the “Bonus Share Expiration Date”) upon the earlier of (i) the date specified by the Company upon not less than 20 business days’ notice and (ii) the first business day following the last day of the first 30 consecutive trading day period in which the daily volume-weighted average price (VWAP) of the Common Shares has been at least equal to the then applicable Bonus Expiration Trigger Price for at least 20 trading days (whether or not consecutive) (the “Bonus Price Condition”).
The “Bonus Expiration Trigger Price” is currently $3.4118 (*)(**).
The Company will make a public announcement by press release of the Bonus Share Expiration Date (i) prior to market open on the Bonus Share Expiration Date in the case of a Bonus Price Condition and (ii) at least 20 business days prior to such date, in the case of the Company setting a Bonus Share Expiration Date.
17. When is the deadline to submit warrants for exercise each day?
Following the distribution of warrants on December 14, 2023, Computershare Trust Company, N.A. must receive shareholders’ completed and duly executed “Election to Purchase Common Shares” form and the exercise price by 5:00 pm New York City time on the exercise date, which must be a business day. If you submit your completed exercise form and/or pay the exercise price after 5:00 p.m. New York City time on any business day, the exercise date will be the next business day.
18. When is the deadline to receive the Bonus Share Fraction?
If you exercise your warrant after 5:00 p.m. New York City time on the Bonus Share Expiration Date, you will not be entitled to the Bonus Share Fraction, so you will receive 1.02584 (*)(**) Common Share upon exercise of each warrant.
19. What is the process to exercise my warrants?
In order to exercise all or any of the warrants, the holder of record is required to deliver to the Warrant Agent a duly executed “Election to Purchase Common Shares” form by 5:00 p.m. New York City time on a business day and pay the exercise price.
20. Can exercise of the warrants be suspended?
The Company will use its commercially reasonable efforts to keep a registration statement effective, subject to certain exceptions, covering the issuance of the Common Shares issuable upon the exercise of the warrants. If the registration statement ceases to be effective for any reason at the time of exercise of any warrants, the right to exercise warrants shall be automatically suspended until such registration statement becomes effective (any such period, an “Exercise Suspension Period”). The Company shall provide notice by press release of any Exercise Suspension Period.
21. Will the terms of the warrants change?
The number of Common Shares issuable upon exercise of the Warrant, the Bonus Expiration Trigger Price, the Redemption Trigger Price and the Implied Per Share Exercise Price are subject to customary public company anti-dilution adjustments. For the avoidance of doubt, the exercise price of $4.00 per warrant will not change upon any such anti-dilution adjustment.
The Company may amend the warrant agreement and the warrants for certain matters without the consent of the holders of warrants and for any other matters with the consent of holders of a majority of outstanding warrants. You should review these provisions of the warrant agreement.
22. What happens to fractional warrants and fractional shares?
Fractional warrants were not issued or distributed. If any fractional warrant would otherwise have been required to be issued or distributed, Diana Shipping Inc. rounded down the total number of warrants issued to the relevant holder to the nearest whole number. As a result, shareholders who own fewer than five Common Shares (or combined multiples thereof) as of the Record Date, were not entitled to any Warrants as a result of such shares. For example, shareholders who owned two, 112 or 142 Common Shares would have received zero, 22 and 28 warrants, respectively.
The Company did not issue fractional Common Shares (or pay cash in lieu thereof) upon the exercise of the warrants. If you were entitled to receive a fractional number of Common Shares upon exercise of the warrants, the Company rounded down the total number of Common Shares issued to you to the nearest whole number. The Company’s calculation was determinative.
Redemption and Expiration of Warrants
23. Are the warrants redeemable at the option of the Company?
Yes, the warrants are redeemable at the Company’s sole option at any time following the last day of the first 30 consecutive trading day period in which the daily VWAP of the Common Shares has been at least equal to the then applicable Redemption Trigger Price for at least 20 trading days (whether or not consecutive) (the “Redemption Price Condition”). The Company may redeem the warrants at its sole option at any time after the Redemption Price Condition has first been met, even if the trading price of the Common Shares subsequently declines.
The “Redemption Trigger Price” is currently $3.8992 (*)(**).
The Company will provide at least 20 calendar days’ notice of the date selected for redemption. The redemption price upon any redemption shall equal to 1/10 of $0.01 per Warrant.
24. When do the warrants expire?
The warrants will expire on the earlier of (x) the Expiration Date, which is 5:00 p.m. New York City time on December 14, 2026, and (y) 5:00 p.m. New York City time on the Business Day prior to the date set for redemption.
25. What happens if I do not exercise the warrants before they expire?
After the expiration of the warrants, you will no longer be entitled to exercise the warrants for Common Shares, and the warrants will have no value.
26. If I do not exercise the warrants before they expire, will my pre-existing ownership of Common Shares be affected?
No. The warrants are a separate security from any Common Shares that you own. However, to the extent you do not exercise your warrants, your proportional share investment in Diana Shipping Inc. may be reduced to the extent other warrant holders exercise their warrants for Common Shares.
Other
27. What happens to my warrants if I sell my Common Shares?
Once you have received warrants in the distribution, you do not need to remain a holder of Common Shares in order to hold or exercise the warrants.
28. What are the U.S. federal income tax consequences of the receipt of the warrants in the distribution?
Diana Shipping Inc. intends to treat the warrant distribution as a non-taxable distribution under Section 305(a) of the Internal Revenue Code of 1986, as amended (the “Code”). If, however, the warrant distribution were treated as a distribution subject to Section 305(b) of the Code a U.S. holders of Common Shares would be treated for U.S. federal income tax purposes as receiving a distribution equal to the fair market value of the warrants. In such case, the warrant distribution would be taxable as a dividend to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). You should consult your own tax advisor regarding the tax consequences of the distribution as well as the investment, disposition and exercise of the warrants.
29. Can I freely resell the shares I receive upon exercise?
The Common Shares issuable upon exercise of the warrants are expected to be freely transferable, unless held by our officers, directors or affiliates, who are subject to our inside trading policies.
30. Where can I obtain more information?
You may contact Computershare Services at 1-877-277-2090 with questions about the warrants and your rights as a warrant holder. We also encourage you to read the prospectus supplement that Diana Shipping Inc. will file on the SEC’s Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system on December 14, 2023, a link of which will then be available on the “SEC Filings” tab under the subpage “Filings” of the “Investors” page of Diana Shipping Inc.’s website at https://www.dianashippinginc.com. All public notices relating to the warrants will also be published on this website.
31. Is management participating in the distribution?
All shareholders of record as of the Record Date were eligible to receive this distribution, including outstanding shares held by management.
32. What if I own options?
Option holders were not entitled to receive warrants in this distribution.
33. Can the Company sell equity securities in the future?
Subject to market conditions, this transaction is not expected to impact the Company’s ability to sell equity securities in the future.
(*) Following the adjustment made to each of the Basic Warrant Exercise Rate, Bonus Share Fraction, Bonus Expiration Trigger Price and Redemption Trigger Price (which came into effect from the open of business on March 4, 2024) in respect of the $0.075 cash dividend payable to holders of record of the Common Shares on March 5, 2024, all in accordance with the relevant provisions of the Warrant Agreement. The initial Basic Warrant Exercise Rate was 1. The initial Bonus Share Fraction was 0.5. The initial Bonus Expiration Trigger Price was $3.50. The initial Redemption Trigger Price was $4.00.
(**) Subject to customary public company anti-dilution adjustments upon the occurrence of certain specified events (including the distribution of any cash dividend) in accordance with the relevant provisions of the Warrant Agreement.