Prospectus Filed Pursuant to Rule 424(b)(2) (424b2)

Date : 08/31/2017 @ 4:12PM
Source : Edgar (US Regulatory)
Stock : Dryships Inc. (MM) (DRYS)
Quote : 2.5  -0.05 (-1.96%) @ 8:00PM

Prospectus Filed Pursuant to Rule 424(b)(2) (424b2)

 
Filed Pursuant to 424(b)(2)
Registration No. 333-202821
PROSPECTUS SUPPLEMENT
(to the Prospectus dated May 7, 2015)
DryShips Inc.
Up to 36,363,636 Shares of Common Stock
Issuable upon the Exercise of Non-Transferable Subscription Rights at $2.75 per share
We are distributing, at no charge, to holders of our common stock, par value $0.01 per share, or the Common Stock, as of August 31, 2017, or the Record Date, non-transferable subscription rights, or Rights, to purchase up to 36,363,636 shares of Common Stock at a price of $2.75 per share in this Rights offering, or the Rights Offering. You will receive one Right for each share of our Common Stock held by you of record as of 5:00 p.m., New York City time, on the Record Date. Each Right will entitle you to purchase 1.1526 shares of Common Stock at a subscription price of $2.75 per share, or the Basic Subscription Right. If you timely and fully exercise your Basic Subscription Right and other Rights holders do not exercise their Basic Subscription Rights in full, you will, subject to availability and allocation, have an oversubscription privilege, or the Oversubscription Privilege, to subscribe for additional shares of Common Stock in an amount you specify, not to exceed (i) 1.1526 shares of our Common Stock per Right or (ii) your oversubscription allocation (described later in this prospectus supplement). The Rights Offering will expire at 5:00 p.m., New York City time, on October 2, 2017, or the Expiration Date , unless the Rights Offering is otherwise extended. Any Right not exercised prior to 5:00 p.m., New York City time, on the Expiration Date will expire worthless.
As of the date hereof, entities affiliated with Mr. George Economou, our Chairman and Chief Executive Officer, beneficially own approximately 36,363,643 shares, or 53.5%, of our issued and outstanding Common Stock. W e have entered into a backstop purchase agreement, or the Purchase Agreement, with Sierra Investments Inc., an entity affiliated with Mr. Economou, or the Backstop Investor, pursuant to which the Backstop Investor has agreed to purchase from us, at $2.75 per share, the number of shares of Common Stock offered pursuant to the Rights Offering that are not issued pursuant to existing shareholders' exercise in full of their Basic Subscription Rights and Oversubscription Privilege.  If our shareholders as of the Record date do not purchase any shares in the Rights Offering, the Backstop Investor will purchase all of the shares offered pursuant to this prospectus supplement, or 36,363,636 shares of Common Stock. Pursuant to the Purchase Agreement, Mr. Economou and his affiliates have also agreed not to exercise any Basic Subscription Right or Oversubscription Privilege they may have to purchase a portion of the shares of Common Stock offered hereby. Consequently, the Basic Subscription Right and Oversubscription Privilege ratios have been calculated assuming such Rights will not be exercised with respect to shares of Common Stock owned by Mr. Economou and his affiliates prior to this Rights Offering.
We are not using an underwriter or selling agent. The subscription agent will hold in escrow the funds we receive from shareholders exercising their Rights until we complete or cancel the Rights Offering. We have engaged American Stock Transfer & Trust Company, LLC to serve as the subscription agent, or the Subscription Agent, and Advantage Proxy Inc. to serve as the information agent, or the Information Agent, for the Rights Offering. If the Rights Offering does not take place for any reason, the Subscription Agent will return all subscription payments received, without interest or penalty, as soon as practicable. See "The Rights Offering— Cancellation; Extensions; Amendments."


The Rights are not transferable and will not be quoted on any stock exchange or trading market. There is no minimum subscription amount required for the consummation of the Rights Offering. You should carefully consider whether to exercise your Rights before the expiration of the Rights Offering. Our board of directors is making no recommendation regarding your exercise of the Rights. As a result of the terms of this Rights Offering, shareholders who do not fully exercise their Rights will own, upon completion of this offering, a smaller proportional interest in us than otherwise would be the case had they fully exercised their Rights. See "Risk Factors—If you do not exercise your Rights, your percentage ownership will be diluted."
Shares of our Common Stock are listed on the Nasdaq Capital Market, or Nasdaq, under the symbol "DRYS." On August 30, 2017, the last reported sale price of shares of our Common Stock on Nasdaq was $3.04 per share. Shares of our Common Stock include preferred stock purchase rights, as described in "Description of Capital Stock—Anti-takeover Provisions—Description of Preferred Share Purchase Rights."
Exercising the Rights and investing in shares of our Common Stock involves a high degree of risk. We urge you to carefully read the section entitled "Risk Factors" beginning on page S-11 of this prospectus supplement, the section entitled "Risk Factors" in our Annual Report on Form 20-F for the fiscal year ended December 31, 2016, which is incorporated herein by reference, and all other information included or incorporated herein by reference in this prospectus supplement in its entirety before you decide whether to exercise your Rights.
   
Per
Share
   
Aggregate
 
Subscription Price
 
$
2.750
   
$
100,000,000
 
Estimated Expenses
 
$
0.004
   
$
141,200
 
Net Proceeds to Us
 
$
2.746
   
$
99,858,800
 

Neither the Securities and Exchange Commission, or the Commission, nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus supplement is August 31, 2017.


 

 
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Page
ABOUT THIS PROSPECTUS SUPPLEMENT
S-ii
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
S-iii
ENFORCEABILITY OF CIVIL LIABILITIES
S-iv
QUESTIONS AND ANSWERS RELATING TO THE RIGHTS OFFERING
S-v
PROSPECTUS SUPPLEMENT SUMMARY
S-1
RISK FACTORS
S-11
USE OF PROCEEDS
S-17
CAPITALIZATION
S-18
PRICE RANGE OF OUR COMMON STOCK
S-19
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
S-20
THE RIGHTS OFFERING
S-21
PURCHASE AGREEMENT
S-31
PLAN OF DISTRIBUTION
S-33
CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
S-34
DESCRIPTION OF CAPITAL STOCK
S-36
EXPENSES RELATING TO THIS OFFERING
S-47
LEGAL MATTERS
S-47
EXPERTS
S-47
WHERE YOU CAN FIND ADDITIONAL INFORMATION
S-47

 
PROSPECTUS
Page
PROSPECTUS SUMMARY
1
RISK FACTORS
12
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
61
PER SHARE MARKET PRICE INFORMATION
63
RATIO OF EARNINGS TO FIXED CHARGES
64
CAPITALIZATION
65
USE OF PROCEEDS
66
PLAN OF DISTRIBUTION
67
SELLING SHAREHOLDERS
69
ENFORCEMENT OF CIVIL LIABILITIES
70
DESCRIPTION OF CAPITAL STOCK
71
DESCRIPTION OF DEBT SECURITIES
79
DESCRIPTION OF WARRANTS
89
DESCRIPTION OF PURCHASE CONTRACTS
90
DESCRIPTION OF RIGHTS
91
DESCRIPTION OF UNITS
92
EXPENSES
93
LEGAL MATTERS
94
EXPERTS
95
WHERE YOU CAN FIND ADDITIONAL INFORMATION
96
 
S-i

ABOUT THIS PROSPECTUS SUPPLEMENT
This prospectus supplement and the accompanying prospectus are part of a registration statement that we filed with the Commission utilizing a "shelf" registration process. This document is in two parts. The first part is this prospectus supplement, which describes the specific terms of this offering and also adds to and updates information contained in the accompanying prospectus and the documents incorporated by reference into this prospectus supplement and the accompanying prospectus. The second part, the accompanying base prospectus, gives more general information and disclosure about our securities that we may offer from time to time, some of which does not apply to this Rights Offering. When we refer to the prospectus, we are referring to both parts combined, and when we refer to the accompanying prospectus, we are referring to the base prospectus.
If the description of this offering varies between this prospectus supplement and the accompanying prospectus, you should rely on the information in this prospectus supplement. This prospectus supplement, the accompanying prospectus and the documents incorporated into each by reference include important information about us and this offering and other information you should know before investing. You should read this prospectus supplement and the accompanying prospectus together with the additional information described under the heading, "Where You Can Find Additional Information" in this prospectus supplement and the accompanying prospectus before investing in shares of our Common Stock.
Any statement made in this prospectus or in a document incorporated or deemed to be incorporated by reference into this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus supplement or in any other subsequently filed document that is also incorporated by reference into this prospectus modifies or supersedes that statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this prospectus.
You should rely only on the information contained in or incorporated by reference in this prospectus supplement, the accompanying prospectus and any free writing prospectus relating to this offering. We have not authorized anyone to provide you with information that is different. If anyone provides you with different or inconsistent information, you should not rely on it. The information contained in or incorporated by reference in the prospectus is accurate only as of the date such information was issued, regardless of the time of delivery of the prospectus.

S-ii

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Matters discussed in this prospectus supplement may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995, or the PSLRA, provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts.
We desire to take advantage of the safe harbor provisions of the PSLRA and are including this cautionary statement in connection with this safe harbor legislation. This document and any other written or oral statements made by us or on our behalf may include forward-looking statements, which reflect our current views with respect to future events and financial performance. The words "anticipate," "believe," "expect," "intend," "estimate," "forecast," "project," "plan," "potential," "may," "should," and similar expressions identify forward-looking statements. We caution that assumptions, expectations, projections, intentions and beliefs about future events may and often do vary from actual results and the differences can be material.
All statements in this document that are not statements of historical fact are forward-looking statements. Forward-looking statements include, but are not limited to, such matters as:
·
our future operating or financial results;
·
statements about planned, pending or recent acquisitions, business strategy and expected capital spending or operating expenses, including drydocking, surveys, upgrades and insurance costs;
·
our ability to procure or have access to financing, our liquidity and the adequacy of cash flow for our operations;
·
our continued borrowing availability under our debt agreements and compliance with the covenants contained therein ;
·
our ability to generate sufficient cash flow to service our existing debt and the incurrence of substantial indebtedness in the future;
·
our ability to successfully employ our existing and newbuild drybulk, tanker, liquefied petroleum gas and offshore support vessels, as applicable;
·
our offshore support contract backlog, contract commencements, offshore support contract terminations, offshore support contract option exercises, offshore support contract revenues, offshore support contract awards and platform and offshore support vessels mobilizations and performance provisions ;
·
our future capital expenditures and investments in the construction, acquisition and refurbishment of our vessels (including the amount and nature thereof and the timing of completion thereof, the delivery and commencement of operations dates, and ability to finance such capital expenditures and investments);
·
statements about drybulk, tanker and liquefied petroleum gas shipping and offshore support market trends, charter rates and factors affecting supply and demand;
·
our expectations regarding the availability of vessel acquisitions; and
·
anticipated developments with respect to pending litigation.
S-iii


The forward-looking statements in this document are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management's examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies that are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish the expectations, beliefs or projections described in the forward-looking statements contained in this prospectus.
Important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the price and trading volume for shares of our Common Stock, the strength of world economies and currencies, general market conditions, including changes in charter rates and vessel values, failure of a seller or shipyard to deliver one or more vessels, failure of a buyer to accept delivery of a vessel, inability to procure financing for acquisitions, capital expenditures or investments or refinancing for existing indebtedness on acceptable terms or at all, repudiation, nullification, termination, modification or renegotiation of our contracts, defaults or contract terminations by one or more charterers of our vessels, changes in demand for drybulk commodities, changes in demand for oil, liquefied petroleum gas or petroleum products, changes in demand for offshore support services, changes in charter rates that may affect the willingness of time charterers to complete their charters or cause time charterers to seek to renegotiate charters , scheduled and unscheduled drydocking, changes in our voyage and operating expenses, including bunker prices, drydocking and insurance costs, complications associated with repairing and replacing equipment in remote locations, limitations on insurance coverage, such as war risk coverage, in certain areas, foreign and U.S. monetary policy and foreign currency fluctuations and devaluations, changes in governmental rules and regulations, changes in tax laws, treaties and regulations, tax assessments and liabilities for tax issues, legal and regulatory matters, including results and effects of legal proceedings, customs and environmental matters, changes in governmental rules and regulations, changes in our relationships with the lenders under our debt agreements, potential liability from pending or future litigation, domestic and international political conditions, potential disruption of shipping routes due to accidents, international hostilities and political events or acts by terrorists.
We refer you to the section entitled "Risk Factors," beginning on page S-11 of this prospectus supplement, on page 12 of the accompanying prospectus and on page six of our most recent Annual Report on Form 20-F for the year ended December 31, 2016, which is incorporated by reference herein, for a more complete discussion of these risks and uncertainties and for other risks and uncertainties. These factors and the other risk factors described in this prospectus supplement are not necessarily all of the important factors that could cause actual results or developments to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results. Consequently, there can be no assurance that actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements.
Forward-looking statements reflect only as of the date on which they are made. We will not update any forward-looking statements to reflect future events, developments, or other information. If we do update one or more forward-looking statements, no inference should be drawn that additional updates will be made regarding that statement or any other forward-looking statements.
ENFORCEABILITY OF CIVIL LIABILITIES
We are incorporated under the laws of the Republic of the Marshall Islands and our principal executive offices are located outside the United States. The majority of our directors and officers and our independent registered public accounting firm reside outside the United States. In addition, substantially all of our assets and the assets of our directors and officers and our independent registered public accounting firm are located outside the United States. As a result, it may not be possible for you to serve legal process within the United States upon us or any of these persons. It may also not be possible for you to enforce, both in and outside the United States, judgments you may obtain in U.S. courts against us or these persons in any action, including actions based upon the civil liability provisions of U.S. federal or state securities laws.
Furthermore, there is substantial doubt that courts of such jurisdictions (i) would enforce judgments of U.S. courts obtained in actions against us, our directors or officers and such experts based upon the civil liability provisions of applicable U.S. federal and state securities laws or (ii) would enforce, in original actions, liabilities against us, our directors or officers and such experts based on those laws.
S-iv

QUESTIONS AND ANSWERS RELATING TO THE RIGHTS OFFERING
The following are examples of what we anticipate will be common questions about the Rights Offering. The answers are based on selected information included elsewhere in this prospectus supplement and the documents incorporated by reference herein. The following questions and answers do not contain all of the information that may be important to you and may not address all of the questions that you may have about the Rights Offering. This prospectus supplement and the documents incorporated by reference herein contain more detailed descriptions of the terms and conditions of the Rights Offering and provide additional information about us and our business, including potential risks related to the Rights Offering, our shares of Common Stock, and our business.
Exercising the Rights and investing in shares of our Common Stock involves a high degree of risk. We urge you to carefully read the section entitled "Risk Factors" beginning on page S-11 of this prospectus supplement, and all other information included or incorporated herein by reference in this prospectus supplement in its entirety, including our Annual Report on Form 20-F for the year ended December 31, 2016, before you decide whether to exercise your Rights.
What is the Rights Offering?
We are distributing the Rights, at no charge, on a pro rata basis to holders of our Common Stock as of 5:00 p.m., New York City time, on the Record Date. You will receive one Right for each share of our Common Stock held of record at the Record Date. Each Right entitles you to a Basic Subscription Right and an Oversubscription Privilege. See "What is the Basic Subscription Right?" and "What is the Oversubscription Privilege?" for more information.
Why are we conducting the Rights Offering?
On August 11, 2017, the audit committee of our board of directors, or the Audit Committee, approved a binding term sheet, or the Term Sheet, pursuant to which we agreed to sell shares of Common Stock to entities affiliated with our Chairman and Chief Executive Officer, Mr. George Economou, for aggregate consideration of $100.0 million at a price of $2.75 per share, or the Private Placement . Pursuant to the Term Sheet, the Audit Committee also agreed to conduct this Rights Offering.
The Private Placement closed on August 29, 2017, when we issued an aggregate of 36,363,636 shares of our Common Stock to several entities affiliated with Mr. Economou as consideration for: (i) the acquisition of 100.0% of the issued and outstanding equity interests of Shipping Pool Investors Inc., which directly holds a 49% interest in Heidmar Holdings LLC, a global tanker pool operator, from SPII Holdings Inc., an entity affiliated with Mr. Economou; (ii) the termination of the participation rights set forth in the Deed of Participation dated May 23, 2017 issued by the Company providing certain participation rights to Mountain Investment Inc., an entity affiliated with Mr. Economou; (iii) forfeiture by Sifnos Shareholders Inc., an entity affiliated with Mr. Economou, or Sifnos, of all outstanding shares of Series D Preferred Stock (which carry 100,000 votes per share) of the Company that it held prior to the closing of the Private Placement; and (iv) the reduction in principal outstanding balance by $27.0 million of our unsecured credit facility, as amended, with the Backstop Investor, or the Sierra Credit Facility, under which the Company is the borrower.
Our Audit Committee determined that the Rights Offering was in our best interests in view of (i) our desire to raise equity capital, (ii) our current market capitalization relative to the amount of equity capital to be raised, and (iii) our desire to give our shareholders the opportunity to purchase shares of our Common Stock at the same price per share that entities affiliated with Mr. Economou acquired shares of our Common Stock in the Private Placement. Pursuant to the Purchase Agreement, Mr. Economou and his affiliates have also agreed not to exercise any Basic Subscription Right or Oversubscription Privilege they may have to purchase a portion of the shares of Common Stock offered in the Rights Offering. Consequently, the Basic Subscription Right and Oversubscription Privilege ratios have been calculated assuming such Rights will not be exercised with respect to shares of Common Stock owned by Mr. Economou and his affiliates prior to this Rights Offering.
S-v


The cash proceeds from the Rights Offering are expected to be used for general corporate purposes and/or vessel acquisitions and/or to repay amounts outstanding under the Sierra Credit Facility. The consideration for shares of our Common Stock issued to the Backstop Investor pursuant to the Purchase Agreement, if any, will be the repayment of amounts outstanding under the Sierra Credit Facility. See "Use of Proceeds."
Am I required to exercise all of the Rights I receive in the Rights Offering?
No. You may exercise any number of your Rights, or you may choose not to exercise any of your Rights. However, if you choose not to exercise your Basic Subscription Right or you exercise less than your full Basic Subscription Rights and other shareholders fully exercise their Basic Subscription Rights or exercise a greater proportion of their Basic Subscription Rights than you exercise, the percentage of our Common Stock owned by these other shareholders will increase relative to your ownership percentage, and your voting and other rights in the Company will be diluted. In addition, if you do not exercise your Basic Subscription Right in full, you will not be entitled to purchase additional shares pursuant to the Oversubscription Privilege and your ownership percentage in our Common Stock may be further diluted. For more information, see "How many shares of Common Stock will be outstanding after the Rights Offering?" in this section.
What is the Basic Subscription Right?
The Basic Subscription Right gives our shareholders the opportunity to purchase 1.1526 shares for each share of Common Stock owned on the Record Date at a subscription price of $2.75 per share. Fractional shares resulting from the exercise of Basic Subscription Rights will be eliminated by rounding down to the nearest whole share, with the total subscription payment being adjusted accordingly. For example, if you owned 1,000 shares of our Common Stock as of 5:00 p.m., New York City time, on the Record Date, your Basic Subscription Right would entitle you to receive 1,000 Rights and you would have the right to purchase 1,152 shares (rounded down from 1,152.60) of Common Stock for $2.75 per share.
You may exercise some or all of your Basic Subscription Rights, or you may choose not to exercise any Basic Subscription Rights at all. You may not sell, transfer, or assign your Basic Subscription Rights. We will issue a maximum of 36,363,636 shares of Common Stock in the Rights Offering, including any shares purchased by the Backstop Investor. To the extent the Rights Offering shares are not purchased by our current shareholders, the Backstop Investor will purchase an equal number of shares pursuant to the backstop commitment in the Purchase Agreement. See "—How does the backstop commitment work?"
If you hold your shares in street name through a broker, bank, or other nominee who uses the services of the Depository Trust Company, or DTC, then DTC will issue one Right to your nominee for every share of Common Stock you own at the Record Date. Each Right can then be used to purchase 1.1526 shares of Common Stock for $2.75 per share, subject to rounding down to the nearest whole number. As in the example above, if you owned 1,000 shares of Common Stock on the Record Date, you would receive 1,000 Rights and have the right to purchase 1,152 shares of Common Stock for $2.75 per share. For more information, see "What should I do if I want to participate in the Rights Offering, but my shares are held in the name of my broker, dealer, custodian bank or other nominee?"
May I subscribe for more than I am entitled to under the Basic Subscription Right?
If you purchase all of the shares available to you pursuant to your Basic Subscription Rights, you will also be entitled to the Oversubscription Privilege to purchase shares of Common Stock that other shareholders do not purchase by exercising their Basic Subscription Rights, subject to certain limitations. You should indicate on your Rights certificate, or the form provided by your nominee if your shares are held in the name of a nominee, how many additional shares of Common Stock you would like to purchase pursuant to your Oversubscription Privilege (discussed below).
S-vi


What is the Oversubscription Privilege?
If you exercise your Basic Subscription Rights in full with respect to all Rights you hold at the time of exercise, you will also be entitled to the Oversubscription Privilege to purchase shares not purchased by other holders under their Basic Subscription Rights, subject to the limitations described below. The subscription price per share that applies to the Oversubscription Privilege is the same subscription price per share that applies to the Basic Subscription Right. You may exercise your Oversubscription Privilege to purchase additional shares of Common Stock in an amount you specify, not to exceed (i) 1.1526 shares of our Common Stock per Right or (ii) your oversubscription allocation.
The oversubscription allocation is a prorated allocation of shares of Common Stock subscribed for by all holders pursuant to the Oversubscription Privilege to the extent necessary to ensure that such shares of Common Stock, together with the shares of Common Stock subscribed for by all holders pursuant to the Basic Subscription Rights, do not exceed the total number of shares of Common Stock offered in this Rights Offering. Shares of Common Stock subscribed for pursuant to the Oversubscription Privilege will be allocated, first, pro rata according to each holder's percentage ownership of Common Stock prior to the Rights Offering and, second, pro rata according to the number of shares subscribed for by each holder pursuant to the Oversubscription Privilege. See "What are the limitations on the Oversubscription Privilege?" below.
Thus, you may purchase additional shares of our Common Stock by exercising the Oversubscription Privilege at a price of $2.75 per share, up to the same number of shares for which your Basic Subscription Right may be exercised, so long as all of the Basic Subscription Rights held by other holders of Rights are not exercised in full.
If I exercise my Basic Subscription Right, must I exercise my Oversubscription Privilege?
No. You may exercise your Basic Subscription Right in full without exercising your Oversubscription Privilege.
What are the limitations on the Oversubscription Privilege?
We will not be able to satisfy your exercise of your Oversubscription Privilege if all other holders of Rights elect to purchase all of the shares offered under their Basic Subscription Rights. We will honor oversubscription requests in full to the extent sufficient shares are available following the exercise of holders' Basic Subscription Rights. If oversubscription requests exceed shares available, we will allocate available shares pro rata in proportion to each holder's percentage ownership of Common Stock prior to the Rights Offering. For example, if Holder A owned 100 shares prior to the Rights Offering and purchased 115 shares pursuant to its Basic Subscription Right and Holder B owned 200 shares prior to the Rights Offering and purchased 230 shares pursuant to its Basic Subscription Right, and Holder A and Holder B both exercise their respective Oversubscription Privilege and elect to each purchase an additional 100 shares, but there were only 100 total shares available to fulfill all oversubscription requests, then Holder A would receive 33.33 (or when rounded down to the nearest whole share, 33) shares and Holder B would receive 66.66 (or when rounded down to the nearest whole share, 66) shares. In the event that, after the allocation of the excess shares described above, there remain shares that have not been allocated (because of rounding or otherwise), the Subscription Agent shall allocate all remaining shares offered hereunder among those holders not allocated all of the shares for which they have exercised their Oversubscription Privilege in proportion to the number of shares subscribed for by each holder pursuant to the Oversubscription Privilege.
Each holder participating in the oversubscription must pay the full amount for all shares of Common Stock requested in the oversubscription no later than 5:00 p.m., New York City time, on the Expiration Date (the same time such holder pays for the shares purchased by exercising its Basic Subscription Right). If you render payment for a fewer number of shares of Common Stock than you are electing to receive in the oversubscription, you will only be eligible to receive such fewer number of shares (if those shares are available for purchase in the oversubscription). In addition, if you paid amounts with respect to the Oversubscription Privilege that are not applied to purchase shares of Common Stock because of prorationing, the amounts not applied to the purchase of shares will be returned to you without interest or deduction, as soon as practicable after the Expiration Date of this Rights Offering. Using the above example, both Holder A and Holder B must pay for the 100 shares they each elected to receive in the oversubscription no later than 5:00 p.m., New York City time, on the Expiration Date even though each will receive only 33 and 66 shares of Common Stock, respectively, due to prorationing. We will refund to each of Holder A and Holder B, without interest or deduction, the difference between the amount paid by each of Holder A and Holder B for the 100 shares elected and the purchase price for the 33 and 66 shares actually received by each holder.
S-vii



Will fractional shares of Common Stock be issued in the Rights Offering?
No. We will not issue fractional shares of Common Stock in the Rights Offering, and holders will only be entitled to purchase a whole number of shares of Common Stock. Fractional shares will be rounded down to the nearest whole share and the subscription price paid will be adjusted accordingly. Any excess subscription payments received by the Subscription Agent will be returned, without interest or penalty, as soon as practicable.
When will I receive my Rights certificate and other subscription documents?
Promptly after the date of this prospectus supplement, the Subscription Agent will send a Rights certificate to each registered holder of our Common Stock as of the close of business on the Record Date, based on our shareholder registry maintained at the transfer agent for our Common Stock. If you hold your shares of Common Stock through a brokerage account, bank, or other nominee, you will not receive an actual Rights certificate. Instead, as described in this prospectus supplement, you must instruct your broker, bank or nominee whether or not to exercise the Rights on your behalf. If you wish to obtain a Rights certificate, you should promptly contact your broker, bank or other nominee and request a separate Rights certificate. It is not necessary to have a physical Rights certificate, if you hold your shares of Common Stock through a brokerage account, bank, or other nominee, to elect to exercise your Rights.
How soon must I act to exercise my Rights?
If you received a Rights certificate and elect to exercise any or all of your Rights, the Subscription Agent must receive your properly completed and signed Rights certificate, all other required subscription documents and full subscription payment prior to 5:00 p.m., New York City time, on the Expiration Date.  If you hold your shares in the name of a custodian bank, broker, dealer or other nominee, your custodian bank, broker, dealer or other nominee may establish a deadline prior to 5:00 p.m., New York City time, on October 2, 2017 by which you must provide it with your instructions to exercise your Rights and pay the subscription price for your shares.
You must timely pay the full subscription price for the full number of shares of Common Stock you wish to acquire under the Basic Subscription Right and the Oversubscription Privilege by delivering to the Subscription Agent payment in the manner above which payment must be received by the expiration of the Rights Offering. To the extent you properly exercise your Oversubscription Privilege for an amount of shares that exceeds the number of the unsubscribed shares available to you, any excess subscription payments will be returned to you after the closing of the Rights Offering, without interest or penalty.
Although we will make reasonable attempts to provide this prospectus supplement to holders of the Rights, the Rights Offering and all Rights will expire at 5:00 p.m., New York City time, on October 2, 2017 (unless extended), whether or not we have been able to locate each person entitled to Rights. Although we have the option of extending the expiration of the Rights Offering, we currently do not intend to do so.
May I transfer my Rights?
No. The Rights granted to you are non-transferable and, therefore, may not be assigned, gifted, purchased, sold or otherwise transferred to anyone else.
Can the board of directors or a committee designated by our board of directors cancel, terminate, amend or extend the Rights Offering?
Yes. We may extend or otherwise amend this Rights Offering although we do not presently intend to do so. However, if we extend the Rights Offering, the backstop commitment by the Backstop Investor may not be available to us. See "Purchase Agreement—Conditions to the Backstop Investor's Obligations" below. In addition, we may cancel the Rights Offering at our discretion. If the Rights Offering is cancelled, all subscription payments received by the Subscription Agent will be returned promptly, without interest or penalty. Our board of directors or a committee designated by our board of directors reserves the right to amend or modify the terms of the Rights Offering at any time, for any reason, if permitted by the terms and provisions of the Purchase Agreement.
S-viii


Are we requiring a minimum subscription to complete the Rights Offering?
No. Subject to the terms of the Purchase Agreement, the Backstop Investor has agreed to backstop the Rights Offering by purchasing from us, at the subscription price, any Rights Offering shares not purchased by our other shareholders. See "—How does the backstop commitment work?"
How was the subscription price of $2.75 per share determined?
The subscription price was determined by the Audit Committee in consultation with its financial advisors and is the same price per share of Common Stock paid by the affiliated entities of Mr. Economou in the Private Placement. The main factors considered by the Audit Committee included the likely cost of capital from other sources, the size and timing of the Rights Offering, the price at which our shareholders might be willing to participate in the Rights Offering, the price at which the Backstop Investor would agree to backstop the offering, and the historical and current trading prices of our Common Stock. The subscription price is not necessarily related to our book value, results of operations, cash flows, financial condition, or the future market value of our Common Stock.
We cannot assure you that you will be able to sell shares of Common Stock purchased in this Rights Offering at a price equal to or greater than the subscription price. We do not intend to change the subscription price in response to changes in the trading price of our Common Stock prior to the closing of the Rights Offering, although we reserve the right to do so, subject to the terms and provisions of the Purchase Agreement. We urge you to obtain a current quote for our common stock before exercising your Rights.
May I participate in the Rights Offering if I sell my shares of Common Stock after the Record Date?
The Record Date for the Rights Offering is August 31, 2017. If you owned shares of Common Stock as of 5:00 p.m., New York City time, on the Record Date, you may participate in the Rights Offering and will receive Rights. If you sell or have sold all of the shares of Common Stock that you held at 5:00 p.m., New York City time, on the Record Date subsequent to that time, you will remain eligible to participate in the Rights Offering and will receive Rights based upon the shares of Common Stock that you held as of 5:00 p.m., New York City time, on the Record Date.
Has our board of directors made a recommendation to our shareholders regarding the Rights Offering?
No. Our board of directors is not making a recommendation regarding any exercise of your Rights. Rights holders who exercise Rights will incur investment risk on new money invested. The stock market has experienced significant volatility over the past few years. As a result, the market price for our Common Stock may be volatile. In addition, the trading volume in our Common Stock may fluctuate more than usual and cause significant price variations to occur. Accordingly, shares of Common Stock purchased in the Rights Offering may trade at a price lower than the subscription price. The trading price of our Common Stock will depend on many factors, which may change from time to time, including, without limitation, our financial condition, performance, and prospects, future sales of our equity or equity-related securities, and other factors. Volatility in the market price of our Common Stock may prevent you from being able to sell the shares when you want or at prices you find attractive. You should make your decision based on your assessment of our business and financial condition, our prospects for the future, the terms of the Rights Offering and the information contained in, or incorporated by reference into, this prospectus supplement. You should carefully consider the risks, among other things, described under the heading "Risk Factors" beginning on page S-11 of this prospectus supplement and in the documents incorporated by reference into this prospectus supplement before investing in shares of our Common Stock.
S-ix


Will our directors, executive officers and significant shareholders participate in the Rights Offering?
As of the date hereof, entities affiliated with Mr. George Economou, our Chairman and Chief Executive Officer, beneficially own approximately 36,363,643 shares, or 53.5%, of our outstanding Common Stock. W e have entered into the Purchase Agreement with the Backstop Investor, an entity affiliated with Mr. Economou, pursuant to which the Backstop Investor has agreed to purchase from us, at $2.75 per share, the number of shares of Common Stock offered pursuant to the Rights Offering that are not issued pursuant to the exercise of Rights. If our shareholders do not purchase any shares in the Rights Offering, the Backstop Investor will purchase all of the shares offered pursuant to this prospectus, or 36,363,636 shares of Common Stock. Pursuant to the Purchase Agreement, Mr. Economou and his affiliates have also agreed not to exercise any Basic Subscription Right or Oversubscription Privilege they may have to purchase a portion of the shares of Common Stock offered hereby. Consequently, the Basic Subscription Right and Oversubscription Privilege ratios have been calculated without taking into account the shares of Common Stock owned by Mr. Economou and his affiliates prior to this Rights Offering.
You should not view the willingness of Mr. Economou to backstop the Rights Offering as a recommendation or other indication by him regarding whether the exercise of the Rights is in your best interests.
How do I exercise my Rights if I own shares in my name?
If you hold shares of Common Stock in your name and you wish to participate in the Rights Offering, you must deliver a properly completed and duly executed Rights certificate and all other required subscription documents, together with payment of the full subscription price for the Basic Subscription Right and any Oversubscription Privilege, to the Subscription Agent before 5:00 p.m., New York City time, on the Expiration Date. If you send an uncertified check, payment will not be deemed to have been delivered to the Subscription Agent until the check has cleared .   In certain cases, you may be required to provide signature guarantees.
You must timely pay the full subscription price for the full number of shares of Common Stock you wish to acquire under the Basic Subscription Right and any Oversubscription Privilege by delivering to the Subscription Agent payment in the manner above which payment must be received by the Expiration Date. To the extent you properly exercise your Oversubscription Privilege for an amount of shares that exceeds the number of the unsubscribed shares available to you, any excess subscription payments will be returned to you after the closing of the Rights Offering, without interest or penalty.
Please follow the delivery instructions on the Rights certificate. Do not deliver documents to the Company. You are solely responsible for completing delivery to the Subscription Agent of your Rights certificate, all other required subscription documents and subscription payment. You should allow sufficient time for delivery of your subscription materials to the Subscription Agent so that the Subscription Agent receives them by 5:00 p.m., New York City time, on the Expiration Date. See "—Who is the Subscription Agent for the Rights Offering and to whom should I send my forms and payment?"
If you send a payment that is insufficient to purchase the number of shares you requested, or if the number of shares you requested is not specified in the forms, the payment received will be applied to exercise your Rights to the fullest extent possible based on the amount of the payment received, subject to the availability of shares and allocation procedure with respect to the Oversubscription Privilege and the elimination of fractional shares.
What should I do if I want to participate in the Rights Offering, but my shares are held in the name of my broker, dealer, custodian bank or other nominee?
If you hold your shares of Common Stock in the name of a broker, dealer, custodian bank or other nominee, then your broker, dealer, custodian bank or other nominee is the record holder of the shares you own and the associated Rights. You will not receive a Rights certificate. The record holder must exercise the Rights on your behalf as the beneficial owner for the shares of Common Stock you wish to purchase pursuant to the Rights Offering.
S-x


If you wish to purchase shares of Common Stock through the Rights Offering, please promptly contact your broker, dealer, custodian bank or other nominee as record holder of your shares. We will ask your record holder to notify you of the Rights Offering. However, if you are not contacted by your broker, dealer, custodian bank or other nominee, you should promptly initiate contact with that intermediary. Your broker, dealer, custodian bank or other nominee may establish a deadline prior to the 5:00 p.m., New York City time, on the Expiration Date of the Rights Offering.
What form of payment is required to purchase our shares of Common Stock?
As described in the instructions accompanying the Rights certificate, payments submitted to the Subscription Agent must be made in U.S. currency, by one of the following two methods:
·
Check or bank draft drawn on a U.S. bank payable to "American Stock Transfer & Trust Company, LLC as Subscription Agent"; or
·
Wire transfer of immediately available funds directly to the account maintained by American Stock Transfer & Trust Company, LLC, as Subscription Agent, for purposes of accepting subscriptions in this Rights Offering. If you desire to make payment by wire transfer, please see the wire instructions on the reverse side of the Rights certificate.
You must timely pay the full subscription price for the full number of shares of Common Stock you wish to acquire under the Basic Subscription Right and any Oversubscription Privilege by delivering to the Subscription Agent payment in the manner above which payment must be received by the expiration of the Rights Offering. To the extent you properly exercise your Oversubscription Privilege for an amount of shares that exceeds the number of the unsubscribed shares available to you, any excess subscription payments will be returned to you after the closing of the Rights Offering, without interest or penalty.
If you wish to use any other form of payment, then you must obtain the prior approval of the Subscription Agent and make arrangements in advance with the Subscription Agent for the delivery of such payment.
Payments will be deemed to have been received upon: (i) clearance of any uncertified check or (ii) receipt of collected funds in the account designated above. If paying by uncertified check, please note that the funds paid thereby may take five or more business days to clear. Accordingly, Rights holders who wish to pay the subscription price by means of uncertified check are urged to make payment sufficiently in advance of the Expiration Date to ensure that such payment is received and clears by such date. If you hold your shares in the name of a broker, dealer, custodian bank or other nominee, separate payment instructions may apply. Please contact your nominee, if applicable, for further payment instructions.
When will I receive my new shares?
If you purchase shares of Common Stock through the Rights Offering, we will issue those shares to you in book-entry, or uncertificated, form as soon as practicable after the completion of the Rights Offering. If you are a registered holder of Common Stock, we will mail to you a direct registration account statement detailing the number of shares of Common Stock that you have purchased in the Rights Offering. If you are a beneficial owner of shares that are registered in the name of a broker or other nominee, you should receive from your broker or other nominee confirmation of your purchase of shares of Common Stock in the Rights Offering. Stock certificates will not be issued for shares of our Common Stock purchased in the Rights Offering, except, however, if you are a registered holder, you may request a stock certificate once you receive your direct registration account statement.
After I exercise my Rights, can I change my mind?
Exercises of Rights may be revoked at any time prior to 5:00 p.m., New York City time, on the Expiration Date of the Rights Offering. If the Expiration Date of the Rights Offering is extended, you may revoke your exercise of Rights at any time until the final Expiration Date of the Rights Offering, as so extended. After the Expiration Date of the Rights Offering, such exercises are irrevocable.
S-xi


Are there backstop purchasers?
Yes. Pursuant to the terms of the Purchase Agreement, Sierra Investments Inc., an entity affiliated with Mr. Economou, our Chairman and Chief Executive Officer, has committed to backstop the Rights Offering.
How does the backstop commitment work?
As of the date hereof, entities affiliated with Mr. George Economou, our Chairman and Chief Executive Officer, beneficially own approximately 36,363,643 shares, or 53.5%, of our outstanding Common Stock. We have entered into the Purchase Agreement with the Backstop Investor, an entity affiliated with Mr. Economou, pursuant to which the Backstop Investor has agreed to purchase from us, at $2.75 per share, the number of shares of Common Stock offered pursuant to the Rights Offering that are not issued pursuant to the exercise of Rights by our existing shareholders as of the Record Date.
If the Rights Offering is fully subscribed by our shareholders, the Backstop Investor will not have the right to acquire any additional shares pursuant to its backstop commitment because the Purchase Agreement provides that a maximum of $100.0 million may be raised pursuant to the Rights Offering and the backstop commitment. If our shareholders do not purchase any shares in the Rights Offering, the Backstop Investor will purchase all of the shares offered pursuant to this prospectus, or 36,363,636 shares of Common Stock.
Pursuant to the Purchase Agreement, Mr. Economou and his affiliates have also agreed not to exercise any Basic Subscription Right or Oversubscription Privilege they may have to purchase a portion of the shares of Common Stock offered hereby. Consequently, the Basic Subscription Right and Oversubscription Privilege ratios have been calculated assuming such Rights will not be exercised with respect to shares of Common Stock owned by Mr. Economou and his affiliates prior to this Rights Offering.
There will be no fee payable to the Backstop Investor pursuant to the Purchase Agreement.
Why is there a backstop purchaser?
We obtained the backstop commitment to maximize the possibility that 36,363,636 shares are either sold in the Rights Offering or purchased subsequent to the offering at the same purchase price at which the Rights were exercisable. Through this arrangement, provided that the Backstop Investor fully performs under the Purchase Agreement, we will raise gross proceeds of $100.0 million through the Rights Offering and the backstop commitment. There is no minimum subscription amount required for the consummation of the Rights Offering.
How many shares of Common Stock will be outstanding after the Rights Offering?
As of August 30, 2017, 67,911,072 shares of Common Stock were issued and outstanding. Assuming the Rights Offering is fully subscribed (either with or without the backstop), then we will issue an additional 36,363,636 shares for a total of 104,274,708 shares of Common Stock outstanding as of the closing of the Rights Offering. As a result of the Rights Offering and backstop (if applicable), subject to the terms of the Purchase Agreement and conditions of the backstop, the ownership interests and voting interests of our existing shareholders that do not fully exercise their Basic Subscription Rights will be diluted.
How much will we receive from the Rights Offering and how will such proceeds be used?
We estimate that the net proceeds to us from the Rights Offering (assuming the full exercise of Rights either with or without the backstop), after deducting estimated offering expenses, will be approximately $99.9 million. The cash proceeds from the Rights Offering are expected to be used for general corporate purposes and/or vessel acquisitions and/or to repay amounts outstanding under the Sierra Credit Facility. The consideration for shares of our Common Stock issued to the Backstop Investor pursuant to the Purchase Agreement, if any, will be the repayment of amounts outstanding under the Sierra Credit Facility. See "Use of Proceeds."
S-xii


Are there risks in exercising my Rights?
Yes. The exercise of your Rights involves risks. Exercising your Rights involves the purchase of additional shares of Common Stock and should be considered as carefully as you would consider any other equity investment. You should consult your own counsel, accountants and other advisers for legal, tax, business, financial and related advice regarding the purchase of our securities. Among other things, you should carefully consider the risks described in the section entitled "Risk Factors" in this prospectus supplement and the documents incorporated by reference herein.
What will happen if I choose not to exercise my Rights?
If you do not exercise any Rights, the number of shares of Common Stock you own will not change. Due to the fact that shares will be purchased by other shareholders and as a result new shares will be issued, your percentage ownership will be diluted after the completion of the Rights Offering. For more information, see "How many shares of Common Stock will be outstanding after the Rights Offering?"
If my exercise of Rights is not valid or if the Rights Offering is not completed, will my subscription payment be refunded to me?
Yes. The Subscription Agent will hold all funds it receives in a segregated bank account until completion of the Rights Offering. If your exercise of Rights is deemed not to be valid or the Rights Offering is not completed, all subscription payments received by the Subscription Agent from you will be returned to you as soon as practicable following the expiration of the Rights Offering, without interest or penalty. If you own shares through a nominee, it may take longer for you to receive your subscription payment because the Subscription Agent will return payments through the record holder of your shares.
What fees or charges apply if I purchase shares in the Rights Offering?
We are not charging any fee or sales commission to issue Rights to you or to issue shares to you if you exercise your Rights. If you exercise your Rights through your broker, dealer, custodian bank or other nominee, you are responsible for paying any fees your nominee may charge you.
What are the material U.S. federal income tax consequences of exercising my Rights?
For U.S. federal income tax purposes, you should not recognize income or loss upon receipt or exercise of Rights. You should consult your tax advisor as to your particular tax consequences resulting from the Rights Offering. For a more detailed discussion, see the section entitled "Certain Material U.S. Federal Income Tax Consequences."
Who is the Subscription Agent for the Rights Offering and to whom should I send my forms and payment?
The Subscription Agent is American Stock Transfer & Trust Company, LLC. If your shares are held in the name of a broker, dealer or other nominee, then you should send your subscription documents and subscription payment to that record holder. If you are the record holder, then you should send your subscription documents, Rights certificate and subscription payment by first class mail, hand delivery, or courier service to:
 
If delivering by mail:
If delivering by hand, express mail, courier,
or other expedited service:
 
   
American Stock Transfer & Trust Company, LLC
Operations Center
P.O. Box 2042
New York, New York 10272-2042
American Stock Transfer & Trust Company, LLC
Operations Center
6201 15th Avenue
Brooklyn, New York 11219
S-xiii


Your payment of the subscription price must be made in United States dollars for the full number of shares of Common Stock for which you are subscribing by cashier's or certified check drawn upon a United States bank payable to the Subscription Agent at the address set forth above or by wire transfer of immediately available funds to the account maintained by the Subscription Agent for the purpose of accepting subscriptions under this Rights Offering. If you desire to make payment by wire transfer please see the wire instructions printed on the reverse side of the Rights certificate.
You are solely responsible for completing delivery to the Subscription Agent of your subscription materials. The subscription materials must be received by the Subscription Agent prior to 5:00 p.m., New York City time, on October 2, 2017. We urge you to allow sufficient time for delivery of your subscription materials to the Subscription Agent.
Whom should I contact if I have other questions?
If you have any questions about the Rights Offering or wish to request another copy of a document, please contact our Information Agent, Advantage Proxy Inc., at:
Banks and Brokers Call:
 
All Others Call:
1-206-870-8565
 
1-877-870-8565 (Toll Free) or
1-206-870-8565 (Collect)

For a more complete description of the Rights Offering, see "The Rights Offering."
How will results of the Rights Offering be made public?
After the completion of the Rights Offering, we expect to issue a press release providing information regarding the results of the Rights Offering.

S-xiv

PROSPECTUS SUPPLEMENT SUMMARY
This summary highlights information that appears elsewhere in this prospectus supplement or in the documents incorporated by reference herein and is qualified in its entirety by the more detailed information, including the financial statements that appear in the documents incorporated by reference. This summary may not contain all of the information that may be important to you. As an investor or prospective investor, you should review carefully the entire prospectus supplement, including the risk factors, and the more detailed information that is included herein and in the documents incorporated by reference herein.
Unless otherwise indicated, references in this prospectus supplement to "DryShips," "we," "us," "our" and the "Company" refer to DryShips Inc., a Marshall Islands corporation, and any one or more of our subsidiaries. Unless otherwise indicated, all references to "$" and "dollars" in this prospectus supplement are to United States dollars, and financial information presented in this prospectus is derived from financial statements that are incorporated by reference and were prepared in accordance with accounting principles generally accepted in the United States. Unless otherwise indicated, all share and per share amounts have been adjusted to account for all reverse stock splits, including the 1-for-25 reverse stock split on March 11, 2016, the 1-for-4 reverse stock split on August 15, 2016, the 1-for-15 reverse stock split on November 1, 2016, the 1-for-8 reverse stock split on January 23, 2017, the 1-for-4 reverse stock split on April 11, 2017, the 1-for-7 reverse stock split on May 11, 2017, the 1-for-5 reverse stock split on June 22, 2017, and the 1-for-7 reverse stock split on July 21, 2017.
We use "LPG" to refer to liquefied petroleum gas, "VLGC" to refer to very large gas carriers that carry LPG and "cbm" to refer to cubic meters in describing the carrying capacity of VLGCs. " DWT," expressed in metric tons each of which is equivalent to 1,000 kilograms, refers to the maximum weight of cargo and supplies that a vessel can carry. We use "VLCC" to refer to very large crude carriers with carrying capacity of between 200,000 and 320,000 DWT, "Suezmax" to refer to crude tankers with carrying capacity of between 120,000 and 170,000 DWT, "Aframax" to refer to crude tankers with carrying capacity of between 80,000 and 120,000 DWT, "Panamax" to refer to drybulk vessels with carrying capacities of between 65,000 and 80,000 DWT, "Newcastlemax" to refer to drybulk vessels with carrying capacity of between 200,000 DWT and 210,000 DWT, and "Kamsarmax" refer to drybulk vessels with carrying capacity of between 80,000 DWT and 90,000 dwt.
Reference in this prospectus supplement to "TMS Entities" refer to TMS Bulkers Ltd., TMS Tankers Ltd., TMS Offshore Services Ltd., and TMS Cardiff Gas Ltd., all of which are entities affiliated with our Chairman and Chief Executive Officer, Mr. George Economou.
Our Company
We are a diversified owner of ocean going cargo vessels. As of August 30, 2017, we owned a fleet of   (i) 13 Panamax drybulk vessels; (ii) four Newcastlemax drybulk vessels; (iii) five Kamsarmax drybulk vessels ; (iv) four VLGCs, three of which are expected to be delivered in September, October and December of 2017; (v) one VLCC; (vi) two Aframax tankers; (vii) one Suezmax tanker; and (viii) six offshore support vessels, comprising two platform supply and four oil spill recovery vessels.
Our operating vessels operate worldwide within the trading limits imposed by our insurance terms.
Our Fleet
Set forth below is summary information concerning our fleet as of August 30, 2017.
S-1

Drybulk Vessels
                   
Redelivery
 
 
Year
Built (1)
 
DWT (2)
 
Type
 
Current employment
or employment
upon delivery
 
Gross
rate
per day
 
Earliest
 
Latest
Panamax:
                         
Raraka
2012
 
76,037
 
Panamax
 
Spot
Spot
 N/A
N/A
Rapallo
2009
75,123
Panamax
Spot
Spot
N/A
N/A
Catalina
2005
74,432
Panamax
Spot
Spot
N/A
N/A
Majorca
2005
74,477
Panamax
Spot
Spot
N/A
N/A
Ligari
2004
75,583
Panamax
Spot
Spot
N/A
N/A
Mendocino
2002
76,623
Panamax
Spot
Spot
N/A
N/A
Bargara
2002
74,832
Panamax
Spot
Spot
N/A
N/A
Ecola
2001
73,391
Panamax
Spot
Spot
N/A
N/A
Capitola
2001
74,816
Panamax
Spot
Spot
N/A
N/A
Levanto
2001
73,925
Panamax
Spot
Spot
N/A
N/A
Maganari
2001
75,941
Panamax
Spot
Spot
N/A
N/A
Marbella
2000
72,561
Panamax
Spot
Spot
N/A
N/A
Redondo
2000
74,716
Panamax
Spot
Spot
N/A
N/A

(1)
The average age of the Panamax drybulk vessels in our fleet, based on year built, is 14.0 years.
(2)
The total aggregate DWT of the Panamax drybulk vessels in our fleet is 972,457.

 
 
Year
Built (1)
 
DWT (2)
 
Type
 
Current employment
or employment
upon delivery (3)
 
Gross
rate
per day (3)
   
Earliest
   
Latest
Newcastlemax:
                             
Bacon
2013
   
205,170
 
  Newcastlemax
 
T/C Index Linked
 
  T/C Index Linked
   
Aug-18
   
Jan-19
Judd
2015
   
205,796
 
  Newcastlemax
 
T/C
 
T/C
   
Dec-17
   
Apr-18
Marini
2014
   
205,854
 
  Newcastlemax
 
T/C
 
T/C
   
Feb-18
   
May-18
Morandi
2013
   
205,854
 
  Newcastlemax
 
T/C Index Linked
 
  T/C Index Linked
   
Feb-18
   
May-18

(1)
The average age of the Newcastlemax drybulk vessels in our fleet, based on year built, is 3.4 years.
(2)
The total aggregate DWT of the Newcastlemax drybulk vessels in our fleet is 822,674.
(3)
T/C means time charter.
 
 
Year
Built (1)
 
DWT (2)
 
Type
Current employment
or employment
upon delivery
 
Gross
rate
per day
   
Earliest
   
Latest
 
Kamsarmax :
                             
Castellani
2014
   
82,129
 
Kamsarmax
Spot
 
Spot
     
N/A
     
N/A
 
Kelly
2017
   
81,300
 
Kamsarmax
Spot
 
Spot
     
N/A
     
N/A
 
Matisse
2014
   
81,128
 
Kamsarmax
Spot
 
Spot
     
N/A
     
N/A
 
Nasaka
2014
   
81,918
 
Kamsarmax
Spot
 
Spot
     
N/A
     
N/A
 
Valadon
2014
   
81,198
 
Kamsarmax
Spot
 
Spot
     
N/A
     
N/A
 

(1)
The average age of the Kamsarmax drybulk vessels in our fleet, based on year built, is 2.6 years.
(2)
The total aggregate DWT of the Kamsarmax drybulk vessels in our fleet is 407,673.

S-2

Very Large Gas Carriers
                         
Redelivery
 
 
Year Built
 
DWT (4)
 
Type
 
Current employment
or employment upon delivery (5)
   
Gross rate
per day
   
Earliest
   
Latest
 
Anderida
2017
 
51,850
 
VLGC
 
T/C
     
T/C
     
Jun-22
     
Jun-25
 
Aisling * (TBN) (1)
2017
 
51,850
 
VLGC
 
T/C
     
T/C
     
Sep-22
     
Sep-25
 
Mont Fort * (TBN) (2)
2017
 
51,850
 
VLGC
 
T/C
     
T/C
     
Oct-27
     
Oct-27
 
Mont Gelé * (TBN) (3)
2017
 
51,850
 
VLGC
 
T/C
     
T/C
   
Dec-27
   
Dec-27
 

(1)
Expected delivery in September 2017.
(2)
Expected delivery in October 2017.
(3)
Expected delivery in December 2017.
(4)
Upon delivery, the total aggregate DWT of the VLGCs in our fleet is expected to be 207,400.
(5)
T/C means time charter.
*TBN means to be named
Tankers
                       
Redelivery
 
Year Built (1)
   
DWT (2)
 
Type
 
Current employment
or employment
upon delivery (3)
 
Gross rate
per day
 
Earliest
 
Latest
Balla
2017
   
113,293
 
Aframax
 
Spot
   
Spot
 
N/A
 
N/A
Samsara
2017
   
159,855
 
Suezmax
 
T/C
   
Base rate plus profit share
 
Mar-22
 
May-25
Shiraga
2011
   
320,105
 
VLCC
 
Spot
   
Spot
 
N/A
 
N/A
Stamos
2012
   
115,666
 
Aframax
 
Spot
   
Spot
 
N/A
 
N/A

(1)
The average age of the tanker vessels in our fleet, based on year built, is 3.0 years.
(2)
The total aggregate DWT of the tanker vessels in our fleet is 708,919.
(3)
T/C means time charter.

S-3

Offshore Support Vessels
             
Current employment
or employment
   
Gross
rate
   
Redelivery
 
 
Year Built (1)
 
DWT (2)
 
Type
 
upon delivery (3)
   
per day (3)
   
Earliest
   
Latest
 
                                   
Platform Supply Vessels:
                                 
Crescendo
2012
 
1,457
 
PSV
 
Laid up
   
N/A
   
N/A
   
N/A
 
Colorado
2012
 
1,430
 
PSV
 
Laid up
   
N/A
   
N/A
   
N/A
 
                                   
Oil Spill Recovery Vessels:
                                 
Indigo
2013
 
1,401
 
OSRV
 
Laid up
   
N/A
   
N/A
   
N/A
 
Jacaranda
2012
 
1,360
 
OSRV
 
Laid up
   
N/A
   
N/A
   
N/A
 
Emblem
2012
 
1,363
 
OSRV
 
Laid up
   
N/A
   
N/A
   
N/A
 
Jubilee
2012
 
1,317
 
OSRV
 
Laid up
   
N/A
   
N/A
   
N/A
 

(1)
The average age of the offshore support vessels in our fleet, based on year built, is 4.5 years.
(2)
The total aggregate DWT of the offshore support vessels in our fleet is 8,328.
(3)
T/C means time charter.
S-4

Management of Our Vessels
We do not employ personnel to run our vessel operating and chartering business on a day-to-day basis. We have entered into an agreement with each TMS Entity for vessel management services, including executive management services. In accordance with the terms of the agreement with each TMS Entity, we and our subsidiaries entered into further agreements with each TMS Entity, effective January 1, 2017, to streamline the services offered by our managers. The all-in base cost for providing the increased scope of services was reduced to $1,643 per day per vessel, which is a 33% reduction from the prior rate, based on a minimum of 20 vessels, decreasing thereafter to $1,500 per day per vessel. The term of the agreements with each TMS Entity is 10 years.
We believe that the TMS Entities have established a reputation in the international shipping industry for operating and maintaining a fleet with high standards of performance, reliability and safety.
The TMS Entities' commercial management services include executive management, commercial, accounting, reporting, financing, legal, manning, catering, information technology, attendance, insurance, technical and operations services .
The TMS Entities' managers may be deemed to be beneficially owned by Mr. George Economou, the Company's Chairman and Chief Executive Officer , and, under the guidance of our board of directors, manage our business, including our own administrative functions, and we monitor the TMS Entities' performance under the management agreements.
Corporate Information
DryShips Inc. is a holding company incorporated under the laws of the Republic of the Marshall Islands. We maintain our principal executive offices at 109 Kifisias Avenue and Sina Street, 151 24 Marousi , Athens, Greece. Our telephone number at that address is (011) (30) (210) 809 0570. Our corporate website address is www.dryships.com . The information on our website is not a part of, or incorporated by reference into, this prospectus supplement.

S-5

Summary of the Rights Offering

The following summary describes the principal terms of the Rights Offering, but it is not intended to be a complete description of the offering. See "The Rights Offering" in this prospectus supplement for a more detailed description of the terms and conditions of the distribution of Rights and the offering of our Common Stock.
Issuer
DryShips Inc.
 
Securities Offered
We are distributing, at no charge, to record holders of shares of our Common Stock as of 5:00 p.m., New York City time, on the record date of August 31, 2017, one non-transferable Right for each share of Common Stock then held of record. For each Right that you own, you will have a Basic Subscription Right to buy from us 1.1526 shares of Common Stock at a subscription price of $2.75 per share and an Oversubscription Privilege.
 
Subscription Price
$2.75 per share of Common Stock. To be effective, any payment related to the exercise of a Right must clear prior to the Expiration Date.
 
Right
Each Right consists of a Basic Subscription Right and an Oversubscription Privilege.
 
Basic Subscription Right
For each whole Right that you own, you will have a subscription right to buy from us 1.1526 shares of our Common Stock at the subscription price. You may exercise your Basic Subscription Right for some or all of the shares of Common Stock available for purchase under such Right, or you may choose not to exercise any portion of your Basic Subscription Right.
 
Oversubscription Privilege
The Oversubscription Privilege entitles holders of Rights who exercise their Basic Subscription Right in full to purchase, at the subscription price, additional shares of Common Stock in an amount to be specified by such holder not to exceed (i) 1.1526 shares of our Common Stock per Right or (ii) such holder's oversubscription allocation.
 
The oversubscription allocation is a prorated allocation of shares of Common Stock subscribed for by all holders pursuant to the Oversubscription Privilege to the extent necessary to ensure that such shares of Common Stock, together with common shares subscribed for by all holders pursuant to the Basic Subscription Right, does not exceed the total number of shares of Common Stock offered in this Rights Offering. Shares of Common Stock subscribed for pursuant to the Oversubscription Privilege will be allocated, first, pro rata according to each holder's percentage ownership of Common Stock prior to the Rights Offering and, second, pro rata according to the number of shares subscribed for by each holder pursuant to the Oversubscription Privilege .
 
No Fractional Shares
Shareholders may exercise the Basic Subscription Right and Oversubscription Privilege only for whole shares. We will not issue fractional shares in the Rights Offering. Fractional shares of Common Stock resulting from the exercise of the Basic Subscription Right or the Oversubscription Privilege will be eliminated by rounding down to the nearest whole share, with the total subscription payment being adjusted accordingly. For example, if you owned 100 common shares as of 5:00 p.m., New York City time, on the Record Date, you would receive 100 Rights, which would entitle you to purchase 115 shares (when rounded down to the nearest whole share) at the subscription price of $2.75 per share. Any excess subscription payments received by the Subscription Agent will be returned, without interest or penalty, as soon as practicable.
 
 

S-6

Record Date
5:00 p.m., New York City time, on August 31, 2017.
 
Expiration Date
The Rights will expire at 5:00 p.m., New York City time, on October 2, 2017, unless the Rights Offering is otherwise extended or is terminated .
 
Use of Proceeds
We estimate that the net proceeds from this Rights Offering, after deducting advisory fees and estimated expenses, will be approximately $99.9 million. The cash proceeds from the Rights Offering are expected to be used for general corporate purposes and/or vessel acquisitions and/or to repay amounts outstanding under the Sierra Credit Facility. The consideration for shares of our Common Stock issued to the Backstop Investor pursuant to the Purchase Agreement, if any, will be the repayment of amounts outstanding under the Sierra Credit Facility. See "Use of Proceeds."
 
Procedures for Exercising Rights
To exercise your Rights, you must take the following steps:
 
·        If you are a registered holder of Common Stock, you must deliver payment, a properly completed Rights certificate and all other required subscription documents to the Subscription Agent before 5:00 p.m., New York City time, on October 2, 2017.
 
·        If you are a beneficial owner of shares that are registered in the name of a broker, dealer, custodian bank or other nominee, your nominee will contact you. You will not receive a Rights certificate from the Subscription Agent or the Company. Your broker, dealer, custodian bank or other nominee must exercise your Rights on your behalf and deliver all documents and payments to the Subscription Agent before 5:00 p.m., New York City time, on October 2, 2017. Please follow the instructions of your nominee, who may require that you meet an earlier deadline for the delivery of your subscription forms and payment to the nominee.
 
You must timely pay the full subscription price for the full number of shares of Common Stock you wish to acquire under the Basic Subscription Right and any over-subscription request by delivering to the Subscription Agent payment in the manner above which payment must be received by the expiration of the Rights Offering. To the extent you properly exercise your Oversubscription Privilege for an amount of shares that exceeds the number of the unsubscribed shares available to you, any excess subscription payments will be returned to you after the closing of the Rights Offering, without interest or penalty.
 
Revocation
Exercises of Rights may be revoked prior to 5:00 p.m., New York City time, on the Expiration Date of the Rights Offering (as such Expiration Date may be extended as provided herein) by following the instructions provided herein. See "The Rights Offering—Rights of Subscribers; Revocation."
 
No Board Recommendation
Our board of directors is not making any recommendation regarding any exercise of your Rights. You should make your decision based on your own assessment of our business and the terms of the Rights Offering. For a discussion of some of the risks involved in investing in our Common Stock, see "Risk Factors" beginning on page S-11 as well as the other information contained or incorporated by reference in this prospectus supplement.
 
S-7

Issuance of Common Stock
If you purchase shares of Common Stock through the Rights Offering, we will issue those shares to you in book-entry, or uncertificated, form as soon as practicable after the completion of the Rights Offering. If you are a registered holder of Common Stock, we will mail to you a direct registration account statement detailing the number of shares of Common Stock that you have purchased in the Rights Offering. If you are a beneficial owner of shares that are registered in the name of a broker or other nominee, you should receive from your broker or other nominee confirmation of your purchase of shares of Common Stock in the Rights Offering. Stock certificates will not be issued for shares of our Common Stock purchased in the Rights Offering, except, however, if you are a registered holder, you may request a stock certificate once you have received your direct registration account statement.
 
No Transfer or Sale of Rights
The Rights may not be sold, transferred or assigned and will not be quoted on any stock exchange or trading market.
 
Market and trading symbol for the Common Stock
Our Common Stock is traded on the Nasdaq Capital Market under the symbol "DRYS."
 
Material U.S. Federal Income Tax Considerations
For U.S. federal income tax purposes, you should not recognize income or loss upon receipt or exercise of Rights. You should consult your own tax advisor as to your particular tax consequences resulting from the rights offering. For a detailed discussion, see "Certain Material U.S. Federal Income Tax Consequences."
 
Backstop Commitment in the Purchase Agreement
As of the date hereof, entities affiliated with Mr. George Economou, our Chairman and Chief Executive Officer, beneficially own approximately 36,363,643 shares, or 53.5%, of our outstanding Common Stock.  W e have entered into a backstop purchase agreement, or the Purchase Agreement, with Sierra Investments Inc., an entity affiliated with Mr. Economou, or the Backstop Investor, pursuant to which the Backstop Investor has agreed to purchase from us, at $2.75 per share, the number of shares of Common Stock offered pursuant to the Rights Offering that are not issued pursuant to existing shareholders' exercise in full of their Basic Subscription Rights and Oversubscription Privilege.  See "Purchase Agreement" below for a discussion of the material terms thereof.  Assuming that the Backstop Investor fully performs under the Purchase Agreement, we will be assured that we will raise gross proceeds of approximately $100.0 million through the Rights Offering. See "Questions and Answers Relating to the Rights Offering—How does the backstop commitment work?"
 
If the Rights Offering is fully subscribed by our shareholders, the Backstop Investor will not have the right to acquire any additional shares pursuant to its backstop commitment because the Purchase Agreement provides that a maximum of $100.0 million may be raised pursuant to the Rights Offering and the backstop commitment.  If our shareholders as of the Record Date do not purchase any shares in the Rights Offering, the Backstop Investor will purchase all of the shares offered pursuant to this prospectus, or 36,363,636 shares of Common Stock.
 
Pursuant to the Purchase Agreement, Mr. Economou and his affiliates have also agreed not to exercise any Basic Subscription Right or Oversubscription Privilege they may have to purchase a portion of the shares of Common Stock offered hereby. Consequently, the Basic Subscription Right and Oversubscription Privilege ratios have been calculated assuming such Rights will not be exercised with respect to shares of Common Stock owned by Mr. Economou and his affiliates prior to this Rights Offering.
 
All of our shares of Common Stock issued to the Backstop Investor pursuant to the Purchase Agreement will be restricted shares and will bear a restrictive legend. The Purchase Agreement provides that shares of Common Stock issued to the Backstop Investor will be subject to a six (6) month lock-up commencing on the closing of the Rights Offering.
 
There will be no fee payable to the Backstop Investor pursuant to the Purchase Agreement. If we cancel the Rights Offering, the Purchase Agreement will be cancelled as well.
S-8

Amendments and Cancellation
We may amend this Rights Offering only in accordance with the terms and provisions of the Purchase Agreement.
 
If we amend this Rights Offering, holders who have previously exercised their Rights would be entitled to revoke their previous exercise of Rights. In addition, we may cancel the Rights Offering if the Purchase Agreement is terminated in accordance with its terms with respect to the Backstop Investor. We will notify you of any cancellation or amendment by issuing a press release. In the event of a material amendment to the terms of this Rights Offering, we will distribute an amended prospectus supplement to shareholders of record and extend the expiration of this Rights Offering.  All shareholder who have exercised their Rights have the right to revoke their previously exercised subscriptions at any time prior to the Expiration Date.
 
If we extend the Rights Offering, the backstop commitment by the Backstop Investor may not be available to us. See "Purchase Agreement—Conditions to the Backstop Investor's Obligations" below.
 
If we cancel the Rights Offering in whole or in part, all affected Rights will expire worthless, and all subscription payments received by the Subscription Agent will be returned, without interest or deduction, promptly. In addition, if we cancel the Rights Offering, the Purchase Agreement will be cancelled as well.
 
Shares Outstanding Before the Rights Offering
 
67,911,072 shares of Common Stock were outstanding as of August 30, 2017.
Shares Outstanding After Completion of the Rights Offering and/or any exercise of the Backstop Commitment
 
104,274,708 shares of Common Stock.
Preferred Share Purchase Rights
Shares of our Common Stock include preferred stock purchase rights, as described in "Description of Capital Stock—Anti-takeover Provisions—Description of Preferred Share Purchase Rights."
 
Fees and Expenses
We are not charging any fee or sales commission to distribute Rights to you or for the delivery of shares of our Common Stock to you if you exercise your Rights. If you exercise your Rights through your broker, dealer, custodian bank or other nominee, you are responsible for paying any fees such intermediary may charge you.
 
 
S-9

 
Risk Factors
Before you exercise your Rights to purchase shares of our Common Stock, you should carefully consider the risks described in the section entitled "Risk Factors," beginning on page S-11 of this prospectus supplement, page 12 of the accompanying prospectus, and in our Annual Report on Form 20-F for the year ended December 31, 2016, which is incorporated herein by reference.
 
Transfer Agent and Registrar
The transfer agent and registrar for shares of our Common Stock is American Stock Transfer & Trust Company, LLC.
 
Subscription Agent
The Subscription Agent for this Rights Offering is American Stock Transfer & Trust Company, LLC.
 
Information Agent
The Information Agent for this Rights Offering is Advantage Proxy Inc. Questions regarding the Rights Offering should be directed to the Information Agent.

S-10

RISK FACTORS
An investment in shares of our Common Stock involves risks and uncertainties. You should consider carefully the following information about these risks and uncertainties before exercising your Rights and buying our Common Stock, together with the risks set forth in the section entitled "Risk Factors" in our Annual Report on Form 20-F for the fiscal year ended December 31, 2016, and under the caption "Risk Factors" or any similar caption in the documents incorporated by reference in this prospectus. The occurrence of any of the risks described below could adversely affect our business prospects, financial condition or results of operations. In that case, the trading price of our Common Stock could decline, and you could lose all or part of the value of your investment.
Risks Relating to the Company
Lawsuits may be brought against us in connection with the ongoing restructuring of our former subsidiaries.
On March 23, 2017, Ocean Rig UDW Inc., its subsidiaries Drillships Financing Holding Inc., Drillships Ocean Ventures Inc. and Drill Rigs Holdings Inc. and certain initial supporting creditors entered into a restructuring agreement. We refer to Ocean Rig UDW Inc. and such subsidiaries as the Ocean Rig Parties. The Ocean Rig Parties are our former subsidiaries. The restructuring agreement provides that a restructuring will be implemented by four separate but interconnected schemes of arrangement under Cayman Islands law and ancillary proceedings under Chapter 15 of the U.S. Bankruptcy Code, seeking recognition of the Cayman provisional liquidation proceedings and the schemes of arrangement as foreign main proceedings and an order of the U.S. Bankruptcy Court giving effect to the schemes in the United States. We refer to these proceedings as the Restructuring Proceedings.
In connection with the Restructuring Proceedings, we and certain of our current executive officers are defendants in a lawsuit brought against us on August 31, 2017, by certain creditors of the Ocean Rig Parties, or the Ocean Rig Creditors, in the High Court of the Republic of the Marshall Islands.  Additional lawsuits may be brought against us by the Ocean Rig Creditors. While we plan to vigorously contest the aforementioned lawsuit and any additional lawsuits that may be brought against us in the future, we can provide no assurance of the outcome of such potential lawsuits, the results of which could have a negative adverse effect on our financial condition.
We are currently subject to litigation and we may be subject to similar or other litigation in the future.
We and certain of our current executive officers are defendants in purported class-action lawsuits pending in the U.S. District Court for the Southern and Eastern Districts of New York, brought on behalf of shareholders of the Company. The lawsuits allege violations of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We and our current chief executive officer are also defendants in a lawsuit filed in the High Court of the Marshall Islands alleging, in relevant part, breaches of fiduciary duty and constructive fraud.  Further, as noted above and below, we and certain of our current executive officers are also defendants in a lawsuit brought by certain Ocean Rig Creditors in the Republic of the Marshall Islands, which lawsuit alleges claims for avoidance and recovery of actual and/or constructive fraudulent conveyances, aiding and abetting fraudulent conveyances, and declaratory judgment.
While we believe these claims to be without merit and intend to continue to defend these lawsuits vigorously, we cannot predict their outcome. Furthermore, we may, from time to time, be a party to other litigation in the normal course of business. Monitoring and defending against legal actions, whether or not meritorious, is time-consuming for our management and detracts from our ability to fully focus our internal resources on our business activities. In addition, legal fees and costs incurred in connection with such activities may be significant and we could, in the future, be subject to judgments or enter into settlements of claims for significant monetary damages. A decision adverse to our interests could result in the payment of substantial damages and could have a material adverse effect on our cash flow, results of operations and financial position.
With respect to any litigation, our insurance may not reimburse us or may not be sufficient to reimburse us for the expenses or losses we may suffer in contesting and concluding such lawsuit. Substantial litigation costs, including the substantial self-insured retention that we were required to satisfy before any insurance applied to the claim, or an adverse result in any litigation may adversely impact our business, operating results or financial condition.
 
S-11


Risks Related to this Rights Offering
After the consummation of the Rights Offering, a significant number of shares of our Common Stock may be concentrated in the hands of our Chairman and Chief Executive Officer, Mr. George Economou, whose interests may not coincide with yours .
Prior to the commencement of the Rights Offering, Mr. George Economou, our Chairman and Chief Executive Officer, may be deemed to have beneficially owned, directly or indirectly, approximately 53.5% of our outstanding Common Stock. If no shareholders participate in the Rights Offering and the Backstop Investor exercises the backstop commitment in full, Mr. George Economou may then be deemed to beneficially own, directly or indirectly, 69.7% of our outstanding Common Stock. As such, Mr. Economou could have considerable influence on our corporate affairs and actions before and after the Rights Offering. Your interests as a holder of our Common Stock may differ from the interests of Mr. Economou.
The subscription price determined for the Rights Offering is not an indication of the fair value of our Common Stock .
Our Audit Committee determined the subscription price after considering the likely cost of obtaining capital from other sources, the size and timing of the Rights Offering, and the price at which our shareholders might be willing to participate in the Rights Offering and the Backstop Investor would be willing to backstop the offering. The subscription price is not intended to bear any relationship to the book value of our assets or our past operations, cash flows, losses, financial condition, net worth, or any other established criteria used to value securities. You should not consider the subscription price to be an indication of the fair value of shares of our Common Stock to be offered in the Rights Offering. After the date of this prospectus supplement, our Common Stock may trade at prices above or below the subscription price.
The market price of our Common Stock may decline during the Rights Offering to a price less than the subscription price .
The market price of our Common Stock may decline during the Rights Offering to a price less than the subscription price. If that occurs, the Rights given to shareholders in the Rights Offering will be "underwater," meaning that shares available in the Rights Offering will cost more to buy than shares of our Common Stock available at prevailing market rates. We do not intend to change the subscription price of the Rights in response to fluctuations in the market price of our Common Stock.
The price of our Common Stock is volatile and may decline before or after the Rights expire or after you exercise your Rights, which means that you could be committed to buying shares of our Common Stock above the prevailing market price .
The market price of our Common Stock could be subject to wide fluctuations in response to numerous factors, including the Rights Offering and reports on our recent performance, as well as factors that have little to do with us or our performance, and these fluctuations could materially reduce our share price. These factors include, among other things, actual or anticipated variations in our operating results and cash flow, the nature and content of our earnings releases, and our competitors' and customers' earnings releases, changes in financial estimates by securities analysts, business conditions in our markets and the general state of the securities markets and the market for similar stocks, the number of our shares of Common Stock outstanding, changes in capital markets that affect the perceived availability of capital to companies in our industry, governmental legislation or regulation, currency and exchange rate fluctuations, as well as general economic and market conditions, such as recessions. In addition, the market price of our Common Stock historically has experienced significant price and volume fluctuations similar to those experienced by the broader stock market in recent years. These broad market fluctuations may cause declines in the market price of our Common Stock.
S-12


We cannot assure you that the public trading market price of our Common Stock will not decline after you elect to exercise your Rights. If that occurs, you may have committed to buy shares of our Common Stock in the Rights Offering at a price greater than the prevailing market price and could have an immediate unrealized loss. Moreover, we cannot assure you that, following the exercise of your Rights, you will be able to sell your shares of Common Stock at a price equal to or greater than the subscription price, and you may lose all or part of your investment in our Common Stock. Our Common Stock is traded on Nasdaq under the symbol "DRYS," and the closing sale price of our Common Stock on Nasdaq on August 30, 2017 was $ 3.04 per share. There can be no assurances that the trading price of our Common Stock will equal or exceed the subscription price at the time of exercise or at the expiration of the subscription period or thereafter.
If you do not exercise your Rights, your percentage ownership will be diluted.
Assuming the Rights Offering is fully subscribed and/or backstopped, we would expect to issue 36,363,636 shares of Common Stock in the Rights Offering. If you choose not to exercise your Rights prior to the expiration of the Rights Offering, or you exercise less than all of your Rights, your percentage ownership in our Common Stock will be diluted relative to shareholders who exercise their Rights and the Backstop Investor who purchases shares pursuant to the backstop commitment, if any. This dilution could be substantial.
If you do not act promptly and follow the subscription instructions, your exercise of the Rights will be rejected.
If you desire to purchase shares in the Rights Offering, you must act promptly to ensure that the Subscription Agent actually receives all required forms and payments, and that all payments clear, before the expiration of the Rights Offering at 5:00 p.m., New York City time, on the Expiration Date. If you are a beneficial owner of shares, you must act promptly to ensure that your broker, dealer, custodian bank or other nominee acts for you and that the Subscription Agent receives all required forms and payments before the Rights Offering expires. We are not responsible if your nominee fails to ensure that the Subscription Agent receives all required forms and payments before the Rights Offering expires. If you fail to complete and sign the required subscription forms, send an incorrect payment amount or a payment does not clear prior to the Expiration Date, or you otherwise fail to follow the subscription procedures that apply to the exercise of your Rights before the Rights Offering expires, the Subscription Agent will reject your subscription or accept it only to the extent of the payment received. Neither we nor the Subscription Agent undertakes any responsibility or action to contact you concerning an incomplete or incorrect subscription form or payment, nor are we under any obligation to correct such forms or payment. We have the sole discretion to determine whether a subscription exercise properly complies with the subscription procedures.
If you make payment of the subscription price by uncertified personal check, your check may not clear in sufficient time to enable you to purchase shares in the Rights Offering.
Any uncertified personal check used to pay the subscription price in the Rights Offering must clear prior to the expiration of the Rights Offering, and the clearing process may require five or more business days. As a result, if you choose to use an uncertified personal check to pay the subscription price, it may not clear prior to 5:00 p.m., New York City time, on the Expiration Date, in which event the exercise of your Rights would be rejected as untimely. You may eliminate this risk by paying the subscription price by wire transfer of immediately available funds or certified or cashier's check or bank draft drawn on a U.S. bank.
You will not be able to sell the shares of Common Stock you buy in the Rights Offering until the shares you elect to purchase are issued to you.
If you purchase shares in the Rights Offering by submitting the required forms and payment, we will mail you a direct registration account statement or, upon request, once you have received the registration account statement, a stock certificate, as soon as practicable following the consummation of the Rights Offering. If your shares are held by a broker, dealer, custodian bank or other nominee and you purchase shares, your account with your nominee will be credited by your nominee. Although we will endeavor to issue the shares promptly after completion of this Rights Offering, there may be a delay between the Expiration Date and the time that the shares are issued. Until the shares of Common Stock you elect to purchase are issued to you by delivery of a direct registration account statement or by a credit to your account by your nominee, as applicable, you may not be able to sell your shares. The stock price may decline between the time you decide to sell your shares and the time you are actually able to sell your shares to a price less than the subscription price, and you may not be able to sell your shares at a price equal to or greater than the subscription price or at all.
S-13


The Rights Offering may cause the market price of our Common Stock to decrease.
Depending upon the trading price of our Common Stock at the time of commencement of the Rights Offering, together with the number of shares of Common Stock we will issue in connection with the Rights Offering (including those shares that could be issued to the Backstop Investor pursuant to its backstop commitment), the Rights Offering may cause the price of our Common Stock to decrease, and it may continue to decrease following expiration of the Rights Offering. If the holders of our Common Stock purchased in the Rights Offering choose to sell some or all of those shares, the resulting sales could further depress the market price of our Common Stock.
There may be future sales or other dilution of our equity, which may adversely affect the market price of our Common Stock.
Although we have agreed not to issue additional equity until after December 31, 2017, we are not restricted from issuing additional shares of Common Stock or preferred shares after that date, including any securities that are convertible into or exchangeable for, or that represent the right to receive, shares of Common Stock or any substantially similar securities. The market price of our Common Stock could decline as a result of the sales of shares of Common Stock or similar securities in the market made after this offering or the perception that such sales could occur.
The Rights are not transferable and there is no market for the Rights.
You may not sell, give away or otherwise transfer your Rights. The Rights are only transferable by operation of law. Because the Rights are non-transferable, there is no market or other means (other than exercise) for you to directly realize any value associated with the Rights.
Because our board of directors and management will have broad discretion over the use of the net proceeds from the Rights Offering, you may not agree with how we use the proceeds, and we may not invest the proceeds successfully or apply the proceeds effectively.
We may use the proceeds of this Rights Offering for general corporate purposes and/or vessel acquisitions and/or to repay amounts outstanding under the Sierra Credit Facility. Accordingly, you will be relying on the judgment of our board of directors and our management with regard to the use of the proceeds of the Rights Offering, and you will not have the opportunity, as part of your investment decision, to influence how the proceeds are being used. Our failure to apply these funds effectively could adversely affect our business by reducing our return on equity and inhibiting our abilities to expand or raise additional capital in the future.
We may cancel this Rights Offering in accordance with the Purchase Agreement at any time prior to the Expiration Date, and neither we nor the Subscription Agent will have any obligation to you except to return your subscription payment.
We may cancel the Rights Offering if the Purchase Agreement is terminated in accordance with its terms with respect to the Backstop Investor. If we cancel the Rights Offering in whole or in part, all affected Rights will expire worthless, and all subscription payments received by the Subscription Agent will be returned, without interest or deduction, promptly. We may also extend the Rights Offering for additional periods in accordance with the terms and provisions of the Purchase Agreement. If we elect to cancel this Rights Offering, neither we nor the Subscription Agent will have any obligation with respect to the Rights except to return to you, without interest or deduction, promptly any subscription payments.
In order to complete this Rights Offering, we will be relying on statements, representations and other information provided to us by third parties.
In order to complete this Rights Offering, we will rely on the accuracy of various statements and representations provided to us by brokers, dealers, holders of rights and other third parties. If these statements or representations are false or inaccurate, it may delay or otherwise negatively affect our or the Subscription Agent's ability to effectuate the terms and conditions of this Rights Offering as described in this prospectus supplement.
S-14


We may have to pay U.S. federal income tax on our U.S. source shipping income, which would reduce our earnings.
Under the Internal Revenue Code of 1986, as amended, or the Code, 50% of the gross shipping income of a vessel owning or chartering corporation, such as the Company and its subsidiaries, that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States is characterized as U.S. source shipping income and such income is subject to a 4% U.S. federal income tax without allowance for deduction, unless that corporation qualifies for exemption from tax under Section 883 of the Code and the regulations promulgated thereunder by the U.S. Department of the Treasury, or the Treasury Regulations.
While we have historically qualified for the statutory tax exemption, we do not believe that we currently so qualify for this exemption for the taxable year ending December 31, 2017. As such, we would be subject to a 4% U.S. federal income tax on our U.S. source shipping income for the taxable year ending December 31, 2017.  We may qualify for exemption under Section 883 of the Code for a future taxable year if certain ownership and documentation requirements are satisfied. There can be no assurances that we will be able to satisfy these requirements.
The exercise of the Rights may cause us to be treated as a "Controlled Foreign Corporation" for U.S. federal income tax purposes, which could have adverse consequences to certain U.S. shareholders.
Special U.S. federal income tax rules apply to a "United States Shareholder" of a foreign corporation that is treated as a "controlled foreign corporation," or CFC, for U.S. federal income tax purposes. We will be treated as a CFC if more than 50% of the vote or value of our issued and outstanding stock is owned for an uninterrupted period of 30 days or more during our taxable year by one or more U.S. persons who themselves each own, after the application of specified attribution rules, 10% or more of all classes of our stock which is entitled to vote, or United States Shareholders.
It is possible that, after the exercise of the Rights, we will be treated as a CFC. If we are treated as a CFC, then each U.S. person who is a United States Shareholder on the last day of our taxable year on which we are a CFC will be required to include his pro rata share of our "Subpart F income" in his income currently as ordinary income, whether or not we makes any distributions of such income.
Subpart F income does not include income derived from the time or voyage charter of vessels. However, Subpart F income does include, among other things, income derived from the bareboat charter of vessels, passive investment income, income from the sale or purchase of certain goods to or from a related party, certain income from the provision of services to a related party and any increase in our investments in certain property located in the United States.
A United States Shareholder's gain on the disposition of our stock will be treated as a dividend (which may be eligible for the preferential rates applicable to "qualified dividend income") to the extent of the United States Shareholder's pro rata share of our earnings and profits not previously taxed to him as Subpart F income. This re-characterization rule would continue to apply for a period of five years after we cease to be a CFC. Any gain in excess of our untaxed earnings and profits would be treated as capital gain, which may be treated as long-term capital gain and subject to preferential U.S. federal income tax rates.
A United States Shareholder will also be required to annually file an information return on Internal Revenue Service Form 5471 reporting his ownership of our common stock and providing certain information regarding us.
Each U.S. person who may be a United States Shareholder is encouraged to consult his or her tax advisers regarding the consequences of our potential status as a CFC in their specific circumstances.
S-15


We are incorporated in the Republic of the Marshall Islands, which does not have a well-developed body of corporate law, and as a result, shareholders may have fewer rights and protections under Marshall Islands law than under a typical jurisdiction in the United States.
Our corporate affairs are governed by our Amended and Restated Articles of Incorporation, Second Amended and Restated Bylaws and by the Marshall Islands Business Corporations Act, or the BCA. The provisions of the BCA resemble provisions of the corporation laws of a number of states in the United States. However, there have been few judicial cases in the Republic of the Marshall Islands interpreting the BCA. The rights and fiduciary responsibilities of directors under the law of the Republic of the Marshall Islands are not as clearly established as the rights and fiduciary responsibilities of directors under statutes or judicial precedent in existence in certain United States jurisdictions. Shareholder rights may differ as well. While the BCA does specifically incorporate the non-statutory law, or judicial case law, of the State of Delaware and other states with substantially similar legislative provisions, our public shareholders may have more difficulty in protecting their interests in the face of actions by management, directors or controlling shareholders than would shareholders of a corporation incorporated in a United States jurisdiction.
We are a "foreign private issuer," which could make shares of our common stock less attractive to some investors or otherwise harm our stock price.
We are a "foreign private issuer," as such term is defined in Rule 405 under the Securities Act of 1933, as amended, or the Securities Act. As a "foreign private issuer" the rules governing the information that we disclose differ from those governing U.S. corporations pursuant to the Exchange Act. We are not required to file quarterly reports on Form 10-Q or provide current reports on Form 8-K disclosing significant events within four days of their occurrence. In addition, our officers and directors are exempt from the reporting and "short-swing" profit recovery provisions of Section 16 of the Exchange Act and related rules with respect to their purchase and sales of our securities. Our exemption from the rules of Section 16 of the Exchange Act regarding sales of shares of our common stock by insiders means that you will have less data in this regard than shareholders of U.S. companies that are subject to the Exchange Act. Moreover, we are exempt from the proxy rules, and proxy statements that we distribute will not be subject to review by the SEC. Accordingly there may be less publicly available information concerning us than there is for other U.S. public companies. These factors could make shares of our Common Stock less attractive to some investors or otherwise harm our stock price.
S-16

USE OF PROCEEDS
We estimate that the net proceeds from this Rights Offering, after deducting advisory fees and estimated expenses, will be approximately $99.9 million. The cash proceeds from the Rights Offering are expected to be used for general corporate purposes and/or vessel acquisitions and/or to repay amounts outstanding under the Sierra Credit Facility. The consideration for shares of our Common Stock issued to the Backstop Investor, if any, will be the repayment of amounts outstanding under the Sierra Credit Facility.
The Sierra Credit Facility bears interest at LIBOR plus 6.5% per annum and matures on December 31, 2021.

S-17

CAPITALIZATION
The following table sets forth our capitalization as of June 30, 2017, on:
·
An actual basis;
·
An as adjusted basis giving effect to:
·
The: (i) net proceeds of approximately $64.7 million during 2017 from the offering of 29,544,487 common shares pursuant to the prospectus supplement filed by the Company on April 3, 2017, (ii) advance payment of $15.3 million in connection with the acquisition of our second VLGC, (iii) a scheduled loan repayment of $0.7 million under one of our credit facilities, (iv) delivery payments of $76.3 million paid with respect to our four Newcastlemax drybulk vessels based on the terms of the respective memoranda of agreement, and (v) aggregate dividends of $2.5 million paid to our common shareholders for the quarter ended June 30, 2017;
·
The issuance and sale on August 29, 2017 of an aggregate of 36,363,636 shares of Common Stock to SPII Holdings Inc., Mountain Investments Inc., and the Backstop Investor at $2.75 per share; and
·
An as further adjusted basis giving effect to:
·
The issuance and sale of all shares of Common Stock offered in this Right Offering at a subscription price of $2.75 per share, after deducting estimated offering expenses of approximately $0.1 million, resulting in net proceeds of approximately $99.9 million.
   
As of June 30, 2017
 
   
Actual
   
As Adjusted (1)
   
As Further Adjusted
 
(in thousands of U.S. Dollars except share data)
                 
                   
Cash and cash equivalents
 
$
104,174
   
$
74,055
   
$
173,914
 
Restricted cash
   
15,010
     
15,010
     
15,010
 
Total cash
 
$
119,184
   
$
89,065
   
$
188,924
 
                         
Secured Credit Facilities
 
$
38,167
   
$
37,500
   
$
37,500
 
New Revolving Facility
   
200,000
     
173,000
     
173,000
 
Financing Fees
   
(6,337
)
   
(6,337
)
   
(6,337
)
Total long-term debt, including current portion
 
$
231,830
   
$
204,163
   
$
204,163
 
                         
Preferred stock, $0.01 par value; 500,000,000 shares authorized, 29 shares of Series D Preferred Stock issued and outstanding at June 30, 2017
   
-
     
-
     
-
 
Common stock, $0.01 par value; 1,000,000,000 shares authorized, 2,002,952 shares issued and outstanding at June 30, 2017
   
20
     
679
     
1,043
 
Treasury stock; $0.01 par value; 3 shares at June 30, 2017
   
-
     
-
     
-
 
Additional paid-in capital
   
3,836,819
     
4,000,880
     
4,100,375
 
Accumulated deficit
   
(3,341,702
)
   
(3,384,202
)
   
(3,384,202
)
Total Dryships shareholders' equity
   
495,137
     
617,357
     
717,216
 
Total capitalization
 
$
726,967
   
$
821,520
   
$
921,379
 

(1) There have been no significant adjustments to our capitalization since June 30, 2017, as so adjusted.
S-18

PRICE RANGE OF OUR COMMON STOCK
Shares of our Common Stock trade on the Nasdaq Capital Market under the symbol "DRYS." The high and low closing prices of shares of our Common Stock on Nasdaq are presented for the periods listed below.
For the Year Ended
   
LOW
   
HIGH
 
December 31, 2016
 
$
27,518.40
   
$
2,182,656.00
 
December 31, 2015
 
$
989,016.00
   
$
13,524,000.00
 
December 31, 2014
 
$
8,949,360.00
   
$
52,920,000.00
 
December 31, 2013
 
$
18,933,600.00
   
$
58,800,000.00
 
December 31, 2012
 
$
17,169,600.00
   
$
45,158,400.00
 

For the Quarter Ended
   
LOW
   
HIGH
 
June 30, 2017
 
$
8.82
   
$
1,401.40
 
March 31, 2017
 
$
1,205.40
   
$
29,635.20
 
December 31, 2016
 
$
27,518.40
   
$
799,680.00
 
September 30, 2016
 
$
48,216.00
   
$
315,215.04
 
June 30, 2016
 
$
258,720.00
   
$
2,182,656.00
 
March 31, 2016
 
$
940,800.00
   
$
2,105,040.00
 
December 31, 2015
 
$
989,016.00
   
$
3,417,456.00
 
September 30, 2015
 
$
1,822,800.00
   
$
8,114,400.00
 
June 30, 2015
 
$
6,820,800.00
   
$
9,996,000.00
 
March 31, 2015
 
$
8,467,200.00
   
$
13,524,000.00
 

For the Month Ended
   
LOW
   
HIGH
 
August 2017 (through August 30, 2017)
 
$
1.23
 
 
$
3.53
 
July 2017
 
$
0.98
   
$
10.15
 
June 2017
 
$
8.82
   
$
95.55
 
May 2017
 
$
82.60
   
$
320.95
 
April 2017
 
$
296.45
   
$
1,401.40
 
March 2017
 
$
1,205.40
   
$
2,077.60
 
February 2017
 
$
1,773.80
   
$
6,252.40
 

S-19

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of shares of our Common Stock as of the date of this prospectus supplement held by beneficial owners of 5% or more of shares of our Common Stock and by all of our directors and officers as a group. All of our shareholders, including the shareholders listed in the table below, are entitled to one vote for each share of Common Stock held. The table below does not give effect to any changes that may result from the completion of the Rights Offering.
 
Shares of Common Stock Beneficially Owned Prior to Offering
 
     
Name and Address of Beneficial Owner (1)
Number
   
Percentage (2)
 
George Economou (3)
   
36,363,643
     
53.5
%
Executive Officers, Key Employees and Directors as a Group
   
36,363,643
     
53.5
%

(1)
Unless otherwise indicated, the business address of each beneficial owner identified is c/o DryShips, 109 Kifisias Avenue and Sina Street, Marousi GR 151 24 Greece.
(2)
Based on 67,911,072 shares of Common Stock outstanding as of August 30, 2017.
(3)
Mr. Economou may be deemed to beneficially own 36,363,643 shares of our Common Stock. Mr. Economou may be deemed to beneficially own 12,000,000 of these shares through SPII Holdings Inc., a Marshall Islands corporation affiliated with Mr. Economou . Mr. Economou may be deemed to beneficially own 14,545,454 of these shares through Mountain Investments Inc., a Marshall Islands corporation affiliated with Mr. Economou . Mr. Economou may be deemed to beneficially own 9,818,185 of these shares through the Backstop Investor . Mr. Economou may be deemed to beneficially own four (4) of these shares through Sphinx Investment Corp., a Marshall Islands corporation affiliated with Mr. Economou.

S-20

THE RIGHTS OFFERING
The following describes the Rights Offering in general and assumes, unless specifically provided otherwise, that you are a record holder of shares of our Common Stock on the Record Date. If you hold your shares of Common Stock through a broker, dealer, custodian bank or other nominee, please refer to "—Notice to Brokers and Nominees" below.
The Subscription Rights
We are distributing to holders of our Common Stock as of 5:00 p.m., New York City time, on August 31, 2017, which is the Record Date for this Rights Offering, at no charge, non-transferable Rights to purchase up to an aggregate of 36,363,636 shares of Common Stock at a price of $2.75 per share in the Rights Offering. You will receive one Right for each share of Common Stock held by you of record as of 5:00 p.m., New York City time, on the Record Date. Rights may be exercised at any time during the subscription period, which commences on September 1, 2017, and continues through the Expiration Date for this Rights Offering, which is 5:00 p.m., New York City time, on October 2, 2017.
You are not required to exercise any of your Rights. The aggregate number of shares purchased in the Rights Offering may not exceed 36,363,636 shares of Common Stock.
Basic Subscription Right
The Basic Subscription Right gives you the right to purchase 1.1526 shares of Common Stock for each share of our Common Stock you hold at the Record Date at a subscription price of $2.75 per share. You may exercise all or a portion of your Rights or you may choose not to exercise any of your Rights. You may not sell, transfer or assign your Rights. If you do not timely and fully exercise your Basic Subscription Right with respect to all the Rights you hold, you will not be entitled to exercise your Oversubscription Privilege to purchase any additional shares of Common Stock offered in the Rights Offering.
Oversubscription Privilege
If you exercise your Basic Subscription Right in full with respect to all Rights you hold, you will also be entitled to an Oversubscription Privilege to purchase any shares not purchased by other holders under their Basic Subscription Rights. The Oversubscription Privilege will entitle you to purchase such number of shares of Common Stock equal to the lesser of (i) 1.1526 shares of our Common Stock per Right and (ii) the result of a prorated allocation of shares of Common Stock subscribed for by all holders pursuant to the Oversubscription Privilege to the extent necessary to ensure that such shares of Common Stock, together with shares of Common Stock subscribed for by all holders pursuant to the Basic Subscription Right, does not exceed the total number of shares of Common Stock offered in this Rights Offering. Shares of Common Stock subscribed for pursuant to the Oversubscription Privilege will be allocated, first, pro rata according to each holder's percentage ownership of Common Stock prior to the Rights Offering and, second, pro rata according to the number of shares subscribed for by each holder pursuant to the Oversubscription Privilege. If you have fully exercised your Basic Subscription Right, you will be eligible to exercise the Oversubscription Privilege. The subscription price per share that applies to the Oversubscription Privilege is the same subscription price per share that applies to the Basic Subscription Right. Thus, you may purchase additional shares of our Common Stock by exercising the Oversubscription Privilege at a price of $2.75 per share so long as all of the Basic Subscription Rights held by other holders of rights are not exercised in full.
You may exercise your Oversubscription Privilege only if you exercise your Basic Subscription Right in full. However, you may exercise your Basic Subscription Right in full without exercising your Oversubscription Privilege. To determine if you have fully exercised your Basic Subscription Right, we will consider only the Basic Subscription Right held by you in the same capacity as the Rights for which you seek to exercise your Oversubscription Privilege.  For example, if you were granted Rights for shares of our Common Stock that you own individually and shares of our Common Stock that you own jointly with your spouse, you may exercise your Oversubscription Privilege with respect to the Rights you own individually, as long as you fully exercise your Basic Subscription Right with respect to your individually owned Rights. You will not, however, be able to exercise the Oversubscription Privilege you own collectively with your spouse unless the Basic Subscription Right collectively owned by you and your spouse is fully exercised. You do not have to subscribe for any shares under the Basic Subscription Right owned jointly with your spouse to exercise your individual Oversubscription Privilege.
S-21


When you complete the portion of your Rights certificate to exercise your Oversubscription Privilege, you will be representing and certifying that you have fully exercised your Basic Subscription Right as to the Rights you hold in that capacity at the time of exercise. You must exercise your Oversubscription Privilege at the same time you exercise your Basic Subscription Right in full. You must fully exercise you Basic Subscription Right for all Rights you hold at the time of exercise in order to exercise your Oversubscription Privilege.
If holders exercise the Oversubscription Privilege for more shares than are available to be purchased pursuant to the Oversubscription Privilege, we will allocate the shares of our Common Stock to be issued pursuant to the exercise of the Oversubscription Privilege pro rata among those oversubscribing holders. " Pro rata " means to each oversubscribing holder based on such holder's percentage ownership of Common Stock prior to the Rights Offering. For example, if Holder A owned 100 shares prior to the Rights Offering and purchased 115 shares pursuant to its Basic Subscription Right and Holder B owned 200 shares prior to the Rights Offering and purchased 230 shares pursuant to its Basic Subscription Right, and Holder A and Holder B both exercise their respective Oversubscription Privilege and elect to each purchase an additional 100 shares, but there were only 100 total shares available to fulfill all oversubscription requests, then Holder A would receive 33.33 (or when rounded down to the nearest whole share, 33) shares and Holder B would receive 66.66 (or when rounded down to the nearest whole share, 66) shares. In the event that, after the allocation of the excess shares described above, there remain shares that have not been allocated (because of rounding or otherwise), the Subscription Agent shall allocate all remaining shares offered hereunder among those holders not allocated all of the shares for which they have exercised their Oversubscription Privilege in proportion to the number of shares subscribed for by each holder pursuant to the Oversubscription Privilege. Each holder participating in the oversubscription must pay the full amount for all shares of Common Stock requested in the oversubscription no later than 5:00 p.m., New York City time, on the Expiration Date (the same time such holder pays for the shares purchased by exercising its Basic Subscription Right). If you render payment for a fewer number of shares of Common Stock than you are electing to receive in the oversubscription, you will only be eligible to receive such fewer number of shares (if those shares are available for purchase in the oversubscription).
If there is a pro rata allocation of the remaining shares of our Common Stock and you would otherwise receive an allocation of a greater number of shares than you subscribed for under your Oversubscription Privilege, then we will allocate to you only the number of shares for which you subscribed. We will allocate the remaining shares among all other holders exercising their Oversubscription Privilege. If you are not allocated the full amount of shares for which you over-subscribe, you will receive a refund of the subscription price, without interest or deduction, that you delivered for those shares of our Common Stock that are not allocated to you. The Subscription Agent will mail such refunds as soon as practicable after the completion of this Rights Offering. Using the above example, both Holder A and Holder B must pay for the 100 shares they each elected to receive in the oversubscription no later than 5:00 p.m., New York City time, on the Expiration Date even though each will receive only 33 and 66 shares of common stock, respectively, due to prorationing. We will refund to each of Holder A and Holder B, without interest or deduction, the difference between the amount paid by each of Holder A and Holder B for the 100 shares elected and the purchase price for the 33 and 66 shares each actually received by such holder.
In order to exercise the Oversubscription Privilege, brokers, dealers, custodian banks and other nominee Rights holders who exercise the Oversubscription Privilege on behalf of beneficial owners must certify to the Subscription Agent and to us with respect to each beneficial owner:
·
the number of Rights exercised under the Basic Subscription Right; and
·
the number of shares subscribed for under the Oversubscription Privilege.
If your shares are held by a broker, dealer, custodian bank or other nominee in book-entry form through DTC, then, in addition to the other materials required to be submitted to the Subscription Agent to exercise your Rights, a Nominee Holder Certification will also be required. See "—Notice To Brokers and Nominees."
S-22

Purchase Agreement
As of the date hereof, entities affiliated with Mr. George Economou, our Chairman and Chief Executive Officer, beneficially own approximately 36,363,643 shares, or 53.5%, of our outstanding Common Stock. We have entered into the Purchase Agreement with the Backstop Investor, an entity affiliated with Mr. Economou, pursuant to which the Backstop Investor has agreed to purchase from us, at $2.75 per share, the number of shares of Common Stock offered pursuant to the Rights Offering that are not issued pursuant to the exercise of Rights. See "Purchase Agreement" below for a discussion of the material terms thereof.
Delivery of Common Stock
If you are a registered holder of Common Stock, we will mail to you a direct registration account statement detailing the number of shares of Common Stock that you have purchased in the Rights Offering as soon as practicable following the closing of the Rights Offering. Following receipt of your direct registration account statement, you may request a stock certificate representing the shares of Common Stock that you purchased in the Rights Offering. If you are a beneficial owner of shares that are registered in the name of a broker or other nominee, you should receive from your broker or other nominee confirmation of your purchase of shares of Common Stock in the Rights Offering.
Reasons for this Rights Offering
On August 11, 2017, the Audit Committee approved the Term Sheet, pursuant to which we agreed to sell shares of Common Stock to entities affiliated with our Chairman and Chief Executive Officer, Mr. George Economou, for aggregate consideration of $100.0 million at a price of $2.75 per share . The Private Placement closed on August 29, 2017, when we issued an aggregate of 36,363,636 shares of our Common Stock to several entities affiliated with Mr. Economou as consideration for: (i) the acquisition of 100.0% of the issued and outstanding equity interests of Shipping Pool Investors Inc., which directly holds a 49% interest in Heidmar Holdings LLC, a global tanker pool operator, from SPII Holdings Inc., an entity affiliated with Mr. Economou; (ii) the termination of the participation rights set forth in the Deed of Participation dated May 23, 2017 issued by the Company providing certain participation rights to Mountain Investment Inc., an entity affiliated with Mr. Economou; (iii) forfeiture by Sifnos, an entity affiliated with Mr. Economou of all outstanding shares of Series D Preferred Stock (which carry 100,000 votes per share) of the Company that it held prior to the closing of the Private Placement; and (iv) the reduction of the principal outstanding balance by $27.0 million of the Sierra Credit Facility.
Pursuant to the Term Sheet, the Audit Committee also agreed to conduct this Rights Offering. Our Audit Committee determined that the Rights Offering was in our best interests and the best interest of our shareholders in view of (i) our desire to raise equity capital, (ii) our current market capitalization relative to the amount of equity capital to be raised, and (iii) our desire to give our shareholders the opportunity to purchase shares of our Common Stock at the same price per share that entities affiliated with Mr. Economou acquired shares of our Common Stock in the Private Placement. The cash proceeds from the Rights Offering are expected to be used for general corporate purposes and/or vessel acquisitions and/or to repay amounts outstanding under our unsecured credit facility, as amended, with the Backstop Investor, or the Sierra Credit Facility. The consideration for shares of our Common Stock issued to the Backstop Investor will be the repayment of amounts outstanding under the Sierra Credit Facility. See "Use of Proceeds."
The subscription price of $2.75 per share was determined through extensive negotiations with the Backstop Investor. In the course of this process, the Audit Committee consulted with our senior management and received financial and market advice from its financial advisor. The Audit Committee considered a number of factors in favor of this Rights Offering, including the following:
·
the current market conditions that present vessel acquisition opportunities at historically low prices;
·
the view that this Rights Offering would enhance our capital structure;
·
the cost and likelihood of obtaining capital from other sources or transactions;
S-23


·
the fact that this Rights Offering would enable all of our shareholders to participate in a material portion of the transaction and mitigate the dilution they might otherwise experience from another equity financing transaction;
·
the fact that this Rights Offering could potentially increase our public float; and
·
the fees and expenses to be incurred by us in connection with this Rights Offering as compared to other forms of capital raising.
The Audit Committee also considered the fact that if certain of our shareholders do not exercise their Rights in full, they may be substantially diluted after completion of this Rights Offering.
After weighing the factors discussed above and the effect of the additional capital that may be generated by the sale of shares pursuant to this Rights Offering, the Audit Committee determined that the Rights Offering is in the best interests of the Company and its shareholders. Although we believe that the Rights Offering will strengthen our financial condition, the Audit Committee and our board of directors is not making any recommendation as to whether you should exercise your Rights.
Method of Exercising Rights
You may exercise your Rights as follows:
Subscription by Registered Holders. If you hold shares of Common Stock in your name, the number of shares you may purchase pursuant to your Basic Subscription Right is indicated on the Rights certificate. You may exercise your Rights by properly completing and executing the Rights certificate and forwarding it, together with your full payment and any other required subscription documents, to the Subscription Agent at the address given under "Questions and Answers Relating to the Rights Offering—Who is the Subscription Agent for the Rights Offering and to whom should I send my forms and payment?" to be received at or before the expiration of the Rights Offering.
Subscription by DTC Participants . If your Rights are held of record through DTC, you may exercise your Basic Subscription Right and your Oversubscription Privilege by instructing DTC to transfer your Rights from your account to the account of the Subscription Agent, together with certification as to the aggregate number of Rights you are exercising and the number of shares of our Common Stock you are subscribing for and payment in full of the subscription price for each share of our Common Stock that you subscribed for.

Subscription by Beneficial Owners. If you are a beneficial owner of shares of Common Stock that are registered in the name of a broker, dealer, custodian bank or other nominee, you will not receive a Rights certificate. Instead, we will issue one Right to the nominee record holder for each share of Common Stock that you own as of the Record Date. If you are not contacted by your nominee, you should promptly contact your nominee in order to subscribe for shares in the Rights Offering and follow the instructions provided by your nominee.
To indicate your decision with respect to your Rights, in addition to any other procedures your broker, dealer, custodian bank or other nominee may require, you should complete and return to your broker, dealer, custodian bank or other nominee, the form entitled "Beneficial Owner Election Form" such that it will be received by them by 5:00 p.m., New York City time, on September 29, 2017, the last business day prior to the Expiration Date. You should receive this form from your broker, dealer, custodian bank or other nominee with the other Rights Offering materials. If you wish to obtain a separate Rights certificate, you should contact the nominee as soon as possible and request that a separate Rights certificate be issued to you. You should contact your broker, dealer, custodian bank or other nominee if you do not receive this form, but you believe you are entitled to participate in this Rights Offering. We are not responsible if you do not receive the form from your broker, dealer, custodian bank or nominee or if you receive it without sufficient time to respond.
S-24


Payment Method. As described in the instructions accompanying the Rights certificate, payments submitted to the Subscription Agent must be made in U.S. currency, by one of the following two methods:
·
Check or bank draft drawn on a U.S. bank payable to "American Stock Transfer & Trust Company, LLC as Subscription Agent"; or
·
Wire transfer of immediately available funds directly to the account maintained by American Stock Transfer & Trust Company, LLC, as Subscription Agent, for purposes of accepting subscriptions in this Rights Offering. If you desire to make payment by wire transfer, please see the wire instructions on the reverse side of the Rights certificate.
Payments will be deemed to have been received upon: (i) clearance of any uncertified check; or (ii) receipt of collected funds in the subscription account designated above. If paying by uncertified check, please note that the funds paid thereby may take five or more business days to clear. Accordingly, we urge you to consider using a wire transfer of immediately available funds, a certified or cashier's check, or a bank draft drawn on a U.S. bank. Rights holders who wish to pay the subscription price by means of uncertified check are urged to make payment sufficiently in advance of the Expiration Date to ensure that such payment is received and clears by such date .
You must timely pay the full subscription price for the full number of shares of Common Stock you wish to acquire under the Basic Subscription Right and any over-subscription request by delivering to the Subscription Agent payment in the manner above which payment must be received by the expiration of the Rights Offering. To the extent you properly exercise your Oversubscription Privilege for an amount of shares that exceeds the number of the unsubscribed shares available to you, any excess subscription payments will be returned to you after the closing of the Rights Offering, without interest or penalty.
If you wish to use any other form of payment, then you must obtain the prior approval of the Subscription Agent and make arrangements in advance with the Subscription Agent for the delivery of such payment.
If you hold your shares in the name of a broker, dealer, custodian bank or other nominee, separate payment instructions may apply. Please contact your nominee, if applicable, for further payment instructions.
You should carefully read and strictly follow the instruction letter accompanying the Rights certificate and any other subscription documents. DO NOT SEND RIGHTS CERTIFICATES, OTHER SUBSCRIPTION DOCUMENTS, OR PAYMENTS DIRECTLY TO US .   We will not consider your subscription received until the Subscription Agent has received delivery of a properly completed and duly executed Rights certificate, all other required subscription documents and payment of the full subscription amount.
The method of delivery of Rights certificates, all other required subscription documents and payment of the subscription amount to the Subscription Agent will be at the risk of the holders of Rights. If sent by mail, we recommend that you send those documents and payments by registered mail, properly insured, with return receipt requested, and that you allow a sufficient number of days to ensure delivery to the Subscription Agent and clearance of payment before the Rights Offering expires.
If you choose to exercise your Rights, the Subscription Agent will send you, no later than ten days after the Expiration Date, a confirmation showing (i) the number of shares of Common Stock purchased pursuant to your Basic Subscription Right and Oversubscription Privilege, (ii) the per share and total purchase price for all of the shares of Common Stock acquired by you, and (iii) any additional amount payable by you or any excess to be refunded to you.
Segregated Account; Return of Funds
The Subscription Agent will hold funds received in payment for the shares of Common Stock in a segregated account pending completion of this Rights Offering. The Subscription Agent will hold these funds until this Rights Offering is completed or is cancelled. If this Rights Offering is cancelled for any reason, the Subscription Agent will return this money to subscribers, without interest or deduction, promptly.
S-25


Missing, Incomplete or Incorrect Subscription Documents or Payment
You should read the instruction letter accompanying the Rights certificate carefully and strictly follow it. If you fail to properly complete and duly sign the Rights certificate and all other required subscription documents or otherwise fail to follow the subscription procedures that apply to the exercise of your Rights before the Rights Offering expires, the Subscription Agent will reject your subscription or accept it only to the extent of the payment received. Neither we nor our Subscription Agent accepts any responsibility to contact you concerning an incomplete or incorrect subscription document, nor are we under any obligation to correct such documents. We have the sole discretion to determine whether a subscription exercise properly complies with the subscription procedures.
If you send a payment that is insufficient to purchase the number of shares you requested, or if the number of shares you requested is not specified in the forms, the exercise of your Rights will be given effect to the fullest extent possible based on the amount of the payment received, subject to the availability of shares and allocation procedure applicable to the exercise of the Oversubscription Privilege and the elimination of fractional shares. Any excess subscription payments received by the Subscription Agent will be returned, without interest or penalty, as soon as practicable following the closing of the Rights Offering.
Expiration Time and Date
The Rights will expire at 5:00 p.m., New York City time, on October 2, 2017, unless we extend the subscription period. If you do not properly exercise your Rights before that time, your Rights will expire and will no longer be exercisable and any Rights not exercised before that time will be void and worthless without any payment to the holders thereof. We will not be obligated to honor any purported exercise of Rights which the Subscription Agent receives after the expiration of this Rights Offering, regardless of when you sent the documents regarding that exercise. Any subscription payments received for shares not allocated or validly purchased will be returned promptly following the Expiration Date.
No Fractional Shares Will Be Issued
Shareholders may exercise the Basic Subscription Right and Oversubscription Privilege, at the subscription price, only for whole shares. We will not issue fractional shares in the Rights Offering. Fractional shares of Common Stock resulting from the exercise of the Basic Subscription Right or the Oversubscription Privilege will be eliminated by rounding down to the nearest whole share, with the total subscription payment being adjusted accordingly. Any excess subscription payments received by the Subscription Agent will be returned, without interest or penalty, as soon as practicable.
Cancellation; Extensions; Amendments
We may extend or otherwise amend this Rights Offering in accordance with the terms and provisions of the Purchase Agreement.
If we amend this Rights Offering as permitted by the Purchase Agreement, holders who have previously exercised their Rights would be entitled to revoke their previous exercise of Rights. We will notify you of any cancellation, extension or amendment by issuing a press release. In the event of a material amendment to the terms of this Rights Offering, we will distribute an amended prospectus supplement to shareholders of record, we may extend the expiration of this Rights Offering and all holders who have exercised their Rights may revoke their previously exercised subscriptions at any time prior to the Expiration Date.
If we extend the Rights Offering, the backstop commitment by the Backstop Investor may not be available to us. See "Purchase Agreement—Conditions to the Backstop Investor's Obligations" below.
If we cancel the Rights Offering in whole or in part, all affected Rights will expire worthless, and all subscription payments received by the Subscription Agent will be returned, without interest or deduction, promptly.
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Subscription Agent
American Stock Transfer & Trust Company, LLC is acting as the Subscription Agent for this Rights Offering under an agreement with us. All Rights certificates, payments of the subscription price and nominee holder certifications, to the extent applicable to your exercise of Rights, must be delivered to American Stock Transfer & Trust Company, LLC as follows:
If delivering by hand, express mail, courier, or other
expedited service:
American Stock Transfer & Trust Company, LLC
Operations Center
6201 15th Avenue
Brooklyn, NY 11219
If delivering by mail:
American Stock Transfer & Trust Company, LLC
Operations Center
P.O. Box 2042
New York, NY 10272-2042
 
You should direct any questions or requests for assistance concerning the method of subscribing for the shares of Common Stock or for additional copies of this prospectus to Advantage Proxy Inc. at 1-877-870-8565 (toll free) or 1-206-870-8565 (collect), or if you are a bank of broker, 1-206-870-8565.
We will pay the fees and expenses of American Stock Transfer & Trust Company, LLC. We have also agreed to indemnify American Stock Transfer & Trust Company, LLC against certain liabilities in connection with this Rights Offering.
If you deliver subscription documents or Rights certificates in a manner different than that described in this prospectus supplement, then we may not honor the exercise of your Rights.
Notice to Brokers and Nominees
If you are a broker, dealer, custodian bank or other nominee holder that holds shares of our Common Stock for the account of others on the Record Date, you should notify the respective beneficial owners of such shares of this Rights Offering as soon as possible to learn their intentions with respect to exercising their Rights. You should obtain instructions from the beneficial owner with respect to their Rights, as set forth in the instructions we have provided to you for your distribution to beneficial owners. If the beneficial owner so instructs, you should complete the appropriate Rights certificates and submit them to the Subscription Agent with the proper payment. If you hold shares of our Common Stock for the account(s) of more than one beneficial owner, you may exercise the number of Rights to which all such beneficial owners in the aggregate otherwise would have been entitled had they been direct record holders of shares of our Common Stock on the Record Date, provided that you, as a nominee record holder, make a proper showing to the Subscription Agent by submitting the form entitled "Nominee Holder Certification" that we will provide to you with your Rights Offering materials. If you did not receive this form, you should contact the Subscription Agent to request a copy.
Beneficial Owners
If you are a beneficial owner of shares of Common Stock and will receive your Rights through a broker, custodian bank or other nominee, we will ask your nominee to notify you of the Rights Offering. If you wish to exercise your Rights, you will need to have your nominee act for you, as described above. To indicate your decision with respect to your Rights, you should follow the instructions of your nominee. You should contact your nominee if you do not receive notice of the Rights Offering but believe you are entitled to participate in the Rights Offering.
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We are not responsible if you do not receive the notice by mail or otherwise from your nominee or if you receive notice without sufficient time to respond to your nominee by the deadline established by your nominee, which may be before the expiration of the Rights Offering.
No Recommendation to Rights Holders
Our board of directors or the Audit Committee is not making any recommendation as to whether or not you should exercise your Rights. You are urged to make your own decision whether or not to exercise your Rights based on your own assessment of our business and this Rights Offering. See "Risk Factors" in this prospectus supplement and in any document incorporated by reference herein or therein.
Validity of Subscriptions
We will resolve all questions regarding the validity and form of the exercise of your Rights, including time of receipt and eligibility to participate in this Rights Offering. Our determination will be final and binding. After the Expiration Date, subscriptions and directions are irrevocable (except in limited circumstances relating to a material amendment of the terms of this Rights Offering), and we will not accept any alternative, conditional or contingent subscriptions or directions. We reserve the absolute right to reject any subscriptions or directions not properly submitted or the acceptance of which would be unlawful. You must resolve any irregularities in connection with your subscriptions before the subscription period expires, unless waived by us at our sole discretion. Neither the Subscription Agent nor we shall be under any duty to notify you or your representative of defects in your subscriptions. A subscription will be considered accepted, subject to our right to cancel this Rights Offering in accordance with the terms and provisions of the Purchase Agreement, only when a properly completed and duly executed Rights certificate and any other required documents and payment of the full subscription amount have been received by the Subscription Agent. Our interpretations of the terms and conditions of this Rights Offering will be final and binding.
Revocation
Exercises of Rights may be revoked at any time prior to 5:00 p.m., New York City time, on the Expiration Date of the Rights Offering. If the Expiration Date of the Rights Offering is extended, you may revoke your exercise of Rights at any time until the final Expiration Date of the Rights Offering, as so extended. After the Expiration Date of the Rights Offering, such exercises are irrevocable.
To be effective, a written notice of revocation must be received by the Subscription Agent at its address identified in this prospectus supplement prior to the Expiration Date of the Rights Offering, as may be extended. Any notice of revocation must specify the name of the person who exercised the Rights for which such exercises are to be revoked and the number of Rights to be revoked. Any funds received by the Subscription Agent will be promptly returned to such holder following a revocation. Revocations of Rights may not be cancelled; however, you may exercise your Rights again by following one of the procedures described above in the section entitled "The Rights Offering—Method of Exercising Rights" at any time prior to the expiration of the Rights Offering.
All questions as to the form and validity (including time of receipt) of any notice of revocation will be determined by us, in our sole discretion, which determination shall be final and binding, subject to the judgments of any courts with jurisdiction over us that might provide otherwise. Neither we nor any other person will be under any duty to give notification of any defect or irregularity in any notice of revocation or incur any liability for failure to give any such notification, subject to the judgment of any court with jurisdiction over us.
Rights of Subscribers
You will have no Rights as a holder of the shares of Common Stock you purchase in the Rights Offering until such shares of Common Stock are issued to you. If you are the record holder, we will mail you a direct registration account statement or, upon request once you have received the direct registration account statement, a stock certificate, as soon as practicable following the closing of the Rights Offering. If your shares are held by a broker, dealer, custodian bank or other nominee and you purchase shares in the Rights Offering, your account with your nominee will be credited by your nominee.
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Fees and Expenses
We will pay all fees charged to us by the Subscription Agent and the Information Agent. You are responsible for paying any other commissions, fees, taxes or other expenses incurred in connection with the exercise of the Rights. Neither the Subscription Agent nor we will pay such expenses.
Backstop Commitment
As of the date hereof, entities affiliated with Mr. George Economou, our Chairman and Chief Executive Officer, beneficially own approximately 36,363,643 shares, or 53.5%, of our outstanding Common Stock. If the Rights Offering is not fully subscribed by our existing shareholders as of the Record Date pursuant to exercises of Basic Subscription Rights and any Oversubscription Privilege, we have entered into the Purchase Agreement with the Backstop Investor, an entity affiliated with Mr. Economou, pursuant to which the Backstop Investor has agreed to purchase from us, at $2.75 per share, the number of shares of Common Stock offered pursuant to the Rights Offering that are not issued pursuant to the exercise of Rights. See "Purchase Agreement" below for a discussion of the material terms thereof. The backstop commitment will maximize the possibility that we raise gross proceeds of approximately $100.0 million through the Rights Offering. See "Questions and Answers Relating to the Offering—How does the backstop commitment work?"
If the Rights Offering is fully subscribed by our shareholders, the Backstop Investor will not have the right to acquire any additional shares pursuant to its backstop commitment because the Purchase Agreement provides that a maximum of $100.0 million may be raised pursuant to the Rights Offering and the backstop commitment. If our shareholders do not purchase any shares in the Rights Offering, the Backstop Investor will purchase all of the shares offered pursuant to this prospectus, or 36,363,636 shares of Common Stock.
Pursuant to the Purchase Agreement, Mr. Economou and his affiliates have also agreed not to exercise any Basic Subscription Right or Oversubscription Privilege they may have to purchase a portion of the shares of Common Stock offered hereby. Consequently, the Basic Subscription Right and Oversubscription Privilege ratios have been calculated without taking into account the shares of Common Stock owned by Mr. Economou and his affiliates prior to this Rights Offering.
There will be no fee payable to the Backstop Investor pursuant to the Purchase Agreement.
Non-Transferability of Rights
The Rights granted to you are non-transferable and, therefore, may not be assigned, gifted, purchased, sold or otherwise transferred to anyone else. Notwithstanding the foregoing, you may transfer your Rights to any affiliate ( i.e. , entities which control the recipient or are controlled by or under common control with the recipient) of yours and your Rights also may be transferred to the estate of the recipient upon the death of such recipient. If the Rights are transferred as permitted, evidence satisfactory to us that the transfer was proper must be received by us prior to the Expiration Date
Regulatory Limitation
We will not be required to issue to you shares of our Common Stock pursuant to this Rights Offering if, in our opinion, you are required to obtain prior clearance or approval from any state or federal regulatory authorities to own or control the shares and if, at the time this Rights Offering expires, you have not obtained this clearance or approval.
U.S. Federal Income Tax Treatment of Subscription Rights Distribution
A U.S. Holder, as defined in "Certain Material U.S. Federal Income Tax Consequences" to this prospectus supplement, should not recognize income, gain, or loss for U.S. federal income tax purposes upon the receipt and exercise of the subscription rights. See "Certain Material U.S. Federal Income Tax Consequences" of this prospectus supplement for further discussion.
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YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE RECEIPT, EXERCISE, EXPIRATION, AND SALE OF THE RIGHTS IN LIGHT OF YOUR OWN PARTICULAR CIRCUMSTANCES AND ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL, OR FOREIGN TAXING JURISDICTION. WE ARE NOT PROVIDING ANY TAX ADVICE IN CONNECTION WITH THIS RIGHTS OFFERING.
Medallion Guarantee May Be Required
Your signature on each Rights certificate must be guaranteed by an eligible institution, such as a member firm of a registered national securities exchange or a member of the Financial Industry Regulatory Authority, or a commercial bank or trust company having an office or correspondent in the United States, subject to standards and procedures adopted by the Subscription Agent, unless:
·
your Rights certificate provides that shares are to be delivered to you as record holder of those Rights; or
·
you are an eligible institution.
Shares of Common Stock Outstanding After this Rights Offering
As of August 30, 2017, 67,911,072 shares of Common Stock were issued and outstanding. Assuming the Rights Offering is fully subscribed (either with or without the backstop), then we will issue an additional 36,363,636 shares for a total of 104,274,708 shares of Common Stock outstanding as of the closing of this offering. As a result of the Rights Offering and backstop (if applicable), subject to the terms of the Purchase Agreement and conditions of the backstop, the ownership interests and voting interests of our existing shareholders that do not fully exercise their Basic Subscription Rights will be diluted.
Questions About Exercising Rights
If you have any questions or require assistance regarding the method of exercising your Rights or requests for additional copies of this document, you should contact Advantage Proxy Inc., the Information Agent, at 1-877-870-8565 (toll free) or 1-206-870-8565 (collect), or if you are a bank of broker, 1-206-870-8565.
Other Matters
We are not making this Rights Offering in any state or other jurisdiction in which it is unlawful to do so, nor are we distributing or accepting any offers to purchase any shares of our Common Stock from subscription rights holders who are residents of those states or other jurisdictions or who are otherwise prohibited by federal or state laws or regulations from accepting or exercising the Rights. We may delay the commencement of this Rights Offering in those states or other jurisdictions, or change the terms of this Rights Offering, in whole or in part, in order to comply with the securities laws or other legal requirements of those states or other jurisdictions. Subject to state securities laws and regulations, we also have the discretion to delay allocation and distribution of any shares you may elect to purchase by exercise of your Basic Subscription Right and Oversubscription Privilege   in order to comply with state securities laws. We may decline to make modifications to the terms of this Rights Offering requested by those states or other jurisdictions, in which case, if you are a resident in those states or jurisdictions or if you are otherwise prohibited by federal or state laws or regulations from accepting or exercising the Rights, you will not be eligible to participate in this Rights Offering.
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PURCHASE AGREEMENT
We have entered into the Purchase Agreement with the Backstop Investor, an entity affiliated with Mr. Economou, our Chairman and Chief Executive Officer. The description of the Purchase Agreement in this section and elsewhere in this prospectus supplement is qualified in its entirety by reference to the complete text of the Purchase Agreement, which is filed as an exhibit to our report on Form 6-K, filed with the Commission on August 31, 2017 and incorporated by reference herein.
Private Placement; Backstop Investor's Purchase
We have entered into the Purchase Agreement with the Backstop Investor pursuant to which the Backstop Investor has agreed to purchase from us, subject to the satisfaction or waiver of certain conditions, including the timely completion of the Rights Offering, at the same subscription price per share as the holders of Rights, in a private offering to be closed after the conclusion of the Rights Offering, the remaining shares of Common Stock that are not purchased through the exercise of Rights. If no shareholders exercise their Rights in the rights offering, the Backstop Investor will purchase all of the shares offered pursuant to this prospectus supplement, or 36,363,636 shares of Common Stock. If the Rights Offering is fully subscribed by our shareholders, the Backstop Investor will not have the right to acquire any shares pursuant to its backstop commitment .
Pursuant to the Purchase Agreement, Mr. Economou and his affiliates have also agreed not to exercise any Basic Subscription Right or Oversubscription Privilege they may have to purchase a portion of the shares of Common Stock offered hereby.
Conditions to the Backstop Investor's Obligations
The Backstop Investor's obligations under the Purchase Agreement are subject to customary conditions, including the following: (i) no material adverse effect on the earnings, business, management, properties, assets, rights, liabilities (contingent or otherwise), capital, cash flow, income, operations, results of operations, condition (financial or otherwise) or prospects of the Company and its subsidiaries, taken as a whole (a "Material Adverse Effect"), shall have occurred since the date of the Purchase Agreement; (ii) the representations and warranties of the Company contained in the Purchase Agreement shall be true and correct in all material respects as of the date of the Purchase Agreement with the same force and effect as if made on and as of such closing date (other than those qualified by materiality, Material Adverse Effect or similar qualifications, which shall be true and correct in all respects), except for those representations and warranties which address matters as of a particular date (which shall remain true and correct as of such date); (iii) all covenants and agreements contained in the Purchase Agreement to be performed by the Company shall have been performed and complied with in all material respects; (iv) the Backstop Investor shall have received a certificate, signed by an executive officer of the Company, certifying as to the matters set forth in clauses (i), (ii) and (iii) above; (v) as of the closing date of the Rights Offering, none of the following events shall have occurred and be continuing: (A) trading in the Common Stock shall have been suspended by the Commission or the Nasdaq Capital Market; or (B) a banking moratorium shall have been declared by U.S. federal or New York State authorities; (vi) the Company shall have complied with the requirements of the Nasdaq Stock Market, LLC for the listing of the common shares to be acquired pursuant to the Purchase Agreement on the Nasdaq Capital Market; (vii) the Company shall have completed the Private Placement and no Basic Subscription Right or Oversubscription Privilege shall be exercised with respect to any shares of Common Stock issued to the Backstop Investor or any of its affiliates in the Private Placement; (viii) no judgment, injunction, decree or other legal restraint shall prohibit the consummation of the Rights Offering or the transactions contemplated by the Purchase Agreement; (ix) no stop order suspending the effectiveness of the registration statement of which this prospectus forms a part shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the SEC; and (x) timely completion of the Rights Offering, which subscription period shall be no longer than twenty (20) business days following the commencement of the Rights Offering, in accordance with the terms and conditions set forth in the Purchase Agreement and this prospectus supplement.
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Termination
The Purchase Agreement may be terminated at any time by mutual written agreement of the Company and the Backstop Investor. The Purchase Agreement will automatically terminate if closing of the shares of Common Stock purchased in the Rights Offering and by the Backstop Investor pursuant to the Purchase Agreement has not occurred on or prior to November 30, 2017.
Indemnification
Under the Purchase Agreement and subject to certain limitations included in the Purchase Agreement, we have agreed to indemnify and hold harmless the Backstop Investor and certain of its related persons with respect to losses arising out of any of the following: (1) any inaccuracy in or breach of any representation or warranty of the Company contained in the Purchase Agreement; (2) any failure by the Company to comply with the covenants and agreements contained in the Purchase Agreement; (3) an untrue statement or alleged untrue statement of any material fact contained in the registration statement, including this prospectus and all other documents filed as a part hereof or incorporated by reference herein, or an omission or alleged omission to state herein a material fact required to be stated herein or necessary to make the statements herein, in light of the circumstances under which they were made, not misleading; (4) any action, suit or proceeding by any shareholder of the Company or any other person relating to the Purchase Agreement or the documents or transactions contemplated by the Purchase Agreement; or (5) by reason of the fact that such Backstop Investor is a party to the Purchase Agreement or in any way arising, directly or indirectly, from the Rights Offering or the consummation of the transactions contemplated by the Purchase Agreement.

Under the Purchase Agreement and subject to certain limitations included in the Purchase Agreement, the Backstop Investor has agreed to indemnify us and certain of our related persons for losses arising out of any of the following: (1) any breach of any representation or warranty or breach of or failure to perform any covenant or agreement on the part of the Backstop Investor contained in the Purchase Agreement; or (2) an untrue statement or alleged untrue statement or omission or alleged omission made in the section of this prospectus or the registration statement on Form F-3 of which this prospectus forms a part, or any amendment or supplement to this prospectus or the registration statement, titled "Purchase Agreement" in reliance upon and in conformity with written information furnished to the Company by the Backstop Investor expressly for use in this prospectus or the registration statement.

Stockholder Rights Plan
With respect to any current or future stockholder rights plan, we have agreed to exclude the Backstop Investor from the definition of "Acquiring Person" (or similar term) as such term is defined in such stockholder rights.
Lock-Up
The Backstop Investor agrees that it will not, without the prior written consent of the Company (which consent may be withheld in its sole discretion), directly or indirectly, (1) sell, offer, contract or grant any option to sell (including without limitation any short sale), pledge, assign transfer, establish an open "put equivalent position" within the meaning of Rule 16a-1(h) under the Exchange Act, or otherwise dispose of any securities of the Company, which for the elimination of any doubt includes any unsubscribed shares in the Rights Offering, or collectively, the "Company Securities," options or warrants to acquire Company Securities, or securities exchangeable or exercisable for or convertible into Company Securities currently or hereafter owned either of record or beneficially (as defined in Rule 13d-3 under the Exchange Act) by the Backstop Investor or its affiliates, (2) enter into any swap, hedge or similar arrangement or agreement that transfers, in whole or in part, the economic risk of ownership of all or any part of Company Securities, or securities exchangeable or exercisable for or convertible into Company Securities currently or hereafter owned either of record or beneficially (as defined in Rule 13d-3 under the Exchange Act) by the Backstop Investor regardless of whether any such transaction is to be settled in securities, in cash or otherwise, (3) make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any Company Securities or securities exchangeable or exercisable for or convertible into Company Securities or any other securities of the Company or (4) or publicly announce an intention to do any of the foregoing, for a period commencing on the date of the closing of the Rights Offering and continuing through the close of trading on the date that is six (6) months after the closing of the Rights Offering.
No Backstop Fee
There will be no backstop fee payable to the Backstop Investor pursuant to the Purchase Agreement.

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PLAN OF DISTRIBUTION
We are distributing, at no charge, to holders of our Common Stock non-transferable Rights to purchase up to 36,363,636 shares of Common Stock. In this Rights Offering, you will receive one Right for every share of Common Stock you own at 5:00 p.m., New York City time, on the Record Date, which is August 31, 2017.
Each Right represents the right to purchase shares of our Common Stock at a subscription price of $2.75 per share and consists of a Basic Subscription Right and an Oversubscription Privilege. The Basic Subscription Right entitles holders of Rights to purchase 1.1526 shares of our Common Stock at the subscription price for each Right held. The Oversubscription Privilege entitles holders of Rights who exercise their Basic Subscription Right in full to purchase, at the subscription price, additional shares of Common Stock in an amount to be specified by such holder not to exceed (i) 1.1526 shares of our Common Stock per Right or (ii) such holder's oversubscription allocation. The oversubscription allocation is a prorated allocation of shares of Common Stock subscribed for by all holders pursuant to the Oversubscription Privilege to the extent necessary to ensure that such shares of Common Stock, together with shares of Common Stock subscribed for by all holders pursuant to the Basic Subscription Right, does not exceed the total number of shares of Common Stock offered in this Rights Offering. Shares of Common Stock subscribed for pursuant to the Oversubscription Privilege will be allocated first, pro rata according to each holder's percentage ownership of Common Stock prior to the Rights Offering and second, pro rata according to the number of shares subscribed for by each holder pursuant to the Oversubscription Privilege.
We intend to distribute Rights certificates, copies of this prospectus supplement and the accompanying prospectus, and certain other relevant documents to those persons that were holders of our Common Shares at 5:00 p.m., New York City time, on August 31, 2017, the Record Date for this Rights Offering.
We have agreed to pay the Subscription Agent and Information Agent customary fees plus certain expenses in connection with the Rights Offering. We have not employed any brokers, dealers or underwriters in connection with the solicitation or exercise of Rights. Except as described in this section, we are not paying any other commissions, underwriting fees or discounts in connection with the Rights Offering.
If you are the record holder, we will mail you a direct registration account statement as soon as practicable following the closing of the Rights Offering. After you receive the direct registration account statement, you may request a stock certificate representing the shares of our Common Stock purchased by you in the Rights Offering. If your shares are held by a broker, dealer, custodian bank or other nominee and you purchase shares in the Rights Offering, your account with your nominee will be credited by your nominee. Shares of our Common Stock issued in connection with the Rights Offering will be trade on Nasdaq under the symbol "DRYS."
The Company may solicit responses from you as a holder of Rights, but we will not pay any employee or person acting on behalf of the Company any commissions or compensation for these services other than their normal employment compensation. We estimate that our total expenses in connection with the Rights Offering will be approximately $0.1 million.
If you have any questions, you should contact the Information Agent as provided in "The Rights Offering—Questions About Exercising Rights."

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CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of certain material U.S. federal income tax consequences, as of the date of this prospectus supplement, to U.S. Holders (as defined below) of the receipt, exercise and expiration of subscription rights received by U.S. Holders in this Rights Offering. For purposes of this discussion, a "U.S. Holder" is a beneficial owner of our Common Stock who holds such shares as a "capital asset" for U.S. federal income tax purposes (generally property held for investment) and is for U.S. federal income tax purposes:
·
an individual who is a citizen or resident of the United States;
·
a corporation, or other entity taxable as a corporation for U.S. federal tax purposes, created or organized in or under the laws of the United States or any state thereof or the District of Columbia;
·
an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
·
a trust (i) that is subject to the primary supervision of a court within the United States and the control of one or more United States persons as defined in section 7701(a)(30) of the Code (as defined below) have the authority to control all substantial decisions of the trust or (ii) that has a valid election in effect under applicable Treasury Regulations to be treated as a United States person.
This discussion does not describe all of the tax consequences that may be relevant to a U.S. Holder in light of its particular circumstances. For example, this discussion does not address:
·
tax consequences to U.S. Holders who may be subject to special tax treatment, such as banks, brokers or dealers in securities or currencies, traders in securities that elect to use the mark-to-market method of accounting for their securities, financial institutions, partnerships or other pass-through entities for U.S. federal income tax purposes (or investors in such entities), certain former citizens or former long-term residents of the United States, regulated investment companies, expatriates, real estate investment trusts, tax-exempt entities, insurance companies, individual retirement accounts or other tax-deferred accounts, or retirement plans;
·
tax consequences to U.S. Holders holding shares of our Common Stock or subscription rights as part of a hedging, constructive sale or conversion, straddle or other risk reducing transaction;
·
tax consequences to U.S. Holders who hold 10% or more of our Common Stock;
·
tax consequences to U.S. Holders whose "functional currency" is not the U.S. dollar;
·
the U.S. federal estate, gift or alternative minimum tax consequences, if any, to U.S. Holders; or
·
any state, local, or non-U.S. tax consequences.
If a partnership or other entity classified as a partnership for U.S. federal tax purposes holds common shares, the tax treatment of a partner of such partnership will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding shares of our Common Stock, you are encouraged to consult your own tax advisors concerning the tax treatment of the receipt, exercise, expiration, and disposition of subscription rights received in this Rights Offering and of the exercise, lapse, and sale of the subscription rights.
This discussion is based upon the provisions of the Code, its legislative history, final and temporary Treasury Regulations promulgated thereunder, published rulings and judicial decisions as of the date of this prospectus. The foregoing authorities are subject to change or differing interpretations at any time with possible retroactive effect. No advance tax ruling has been or will be sought or obtained from the Internal Revenue Service, or the IRS, regarding the U.S. federal income tax consequences described below. If the IRS contests a conclusion set forth herein, no assurance can be given that a U.S. Holder would ultimately prevail in a final determination by a court.
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THIS DISCUSSION IS PROVIDED FOR GENERAL INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE TO ANY U.S. HOLDER. EACH U.S. HOLDER IS ENCOURAGED TO CONSULT ITS OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE RECEIPT, EXERCISE, EXPIRATION, AND DISPOSITION OF SUBSCRIPTION RIGHTS RECEIVED IN THIS RIGHTS OFFERING IN LIGHT OF ITS PARTICULAR CIRCUMSTANCES AND ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL, OR FOREIGN TAXING JURISDICTION.
Consequences of the Receipt, Exercise and Expiration of the Rights
Receipt of the Rights
For U.S. federal income tax purposes, a U.S. Holder should not recognize income, gain, or loss upon its receipt of subscription rights in this Rights Offering. A U.S. Holder's basis in the subscription rights received in this Rights Offering will generally be zero if the fair market value of the subscription rights on the date such subscription rights are distributed by us is less than 15% of the fair market value on such date of the shares of our Common Stock with respect to which the subscription rights are received.  Notwithstanding the preceding sentence, a U.S. Holder may elect, in its U.S. federal income tax return for the taxable year in which the subscription rights are received, to allocate part of its basis in its shares of our Common Stock held to the subscription rights. This election is irrevocable and would apply to all of the subscription rights received pursuant to this Rights Offering. If this election is made or if fair market value of the subscription rights equals or is greater than 15% of the fair market value of our Common Stock as of the date of distribution of the subscription rights, the U.S. Holder will allocate basis from his or its shares of our Common Stock to the subscription rights that are received.  The amount of basis required to be allocated in proportion to the fair market value of our Common Stock relative to the fair market value of the subscription rights on the date the subscription rights are distributed by us. Because there is no separate market for the subscription rights, it is unclear how to determine the fair market value of the subscription rights for these purposes, and a U.S. Holder is encouraged to consult with his or its tax advisors. A U.S. Holder's holding period for the subscription rights will include the U.S. Holder's the holding period in the shares of our Common Stock with respect to which the subscription rights are received.
Exercise of the Rights
For U.S. federal income tax purposes, a U.S. Holder should not recognize income, gain, or loss upon its exercise of subscription rights received in this Rights Offering. A U.S. Holder's basis in the shares of our Common Stock acquired upon the exercise of the subscription rights should equal the sum of the subscription price paid for the shares and the U.S. Holder's tax basis, if any, in the subscription rights. The holding period for the shares of our Common Stock acquired through the exercise of the subscription rights will begin on the date the subscription rights are exercised.
Notwithstanding the foregoing, if a U.S. Holder exercises Rights received in this Rights Offering after disposing of the shares of our Common Stock with respect to which the subscription rights are received, then certain aspects of the U.S. federal income tax treatment of the exercise of the subscription rights are unclear, including (i) the allocation of the basis of the shares sold and the subscription rights received in respect of such shares, (ii) the impact of such allocation on the amount and timing of gain or loss recognized with respect to the shares sold, and (iii) the impact of such allocation on the basis of the shares of our Common Stock acquired through the exercise of such subscription rights.  A U.S. Holder that disposes of shares of our Common Stock acquired upon the exercise of the subscription rights may not be able to recognize a loss for U.S. federal income tax purposes.
Expiration of the Rights
For U.S. federal income tax purposes, a U.S. Holder should not recognize income, gain, or loss upon the expiration of the subscription rights received in this Rights Offering, and the tax basis of the shares of our Common Stock in respect of which the subscription rights were received will equal their basis before receipt of such subscription rights.  However, if a U.S. Holder allocates basis from his or its common shares to the subscription rights (as described above in "–Receipt of the Subscription Rights"), such U.S. Holder may not be able to recognize a loss on the expiration of the subscription rights for U.S. federal income tax purposes.
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DESCRIPTION OF CAPITAL STOCK
The following is a description of the material terms of our capital stock. Copies of our Amended and Restated Articles of Incorporation, Second Amended and Restated Bylaws, Certificate of Designations of the Series A Convertible Preferred Shares, Certificate of Designations of the Series B Convertible Preferred Shares, Statement of Designations of the Series C Convertible Preferred Shares, Certificate of Designation of the Series D Preferred Stock, and Statement of Designations of the Series E-1 Convertible Preferred Shares and Series E-2 Convertible Preferred Shares, respectively, are incorporated by reference as exhibits to our Annual Report on Form 20-F for the year ended December 31, 2016. Please also see the form of Certificate of Designations of the Series A Participating Preferred Shares, which was filed as an exhibit to our Registration Statement on Form 8-A on January 18, 2008 and is incorporated by reference herein.
Authorized and Outstanding Capital Stock
Under our Amended and Restated Articles of Incorporation, our authorized capital stock consists of 1,000,000,000 shares of common stock, par value $0.01 per share, of which 67,911,072 shares (excluding treasury stock) were issued and outstanding as of August 30, 2017 and 500,000,000 shares of preferred stock, par value $0.01 per share, of which 100,000,000 shares have been designated as Series A Convertible Preferred Stock, 10,000,000 as Series A Participating Preferred Stock, 100,000,000 shares have been designated as Series B Convertible Preferred Stock, 10,000 shares have been designated as Series C Convertible Preferred Stock, 3,500,000 shares have been designated as Series D Preferred Stock, 50,000 shares have been designated as Series E-1 Convertible Preferred Stock, and 50,000 shares have been designated as Series E-2 Convertible Preferred Stock. As of August 30, 2017, there were no shares of preferred stock issued and outstanding. All of our shares of stock are in registered form.
Description of Common Stock
Each share of our outstanding Common Stock entitles the holder to one vote on all matters submitted to a vote of shareholders. Subject to preferences that may be applicable to any outstanding shares of preferred stock, holders of shares of our Common Stock are entitled to receive ratably all dividends, if any, declared by our board of directors out of funds legally available for dividends. Holders of shares of our Common Stock do not have conversion, redemption or preemptive rights to subscribe to any of our securities. All outstanding shares of our Common Stock are fully paid and non-assessable. The rights, preferences and privileges of holders of shares of our Common Stock are subject to the rights of the holders of any preferred shares that may be outstanding. Shares of our Common Stock are listed on Nasdaq under the symbol "DRYS."
On February 22, 2016, a committee of our board of directors determined to affect a 1-for-25 reverse stock split of shares of our Common Stock. The reverse stock split occurred, and shares of our Common Stock began trading on a split adjusted basis on Nasdaq as of the opening of trading on March 11, 2016.
On July 29, 2016, our board of directors determined to effect a 1-for-4 reverse stock split of shares of our Common Stock. The reverse stock split occurred, and shares of our Common Stock began trading on a split adjusted basis on Nasdaq as of the opening of trading on August 15, 2016.
On October 27, 2016, our board of directors determined to effect a 1-for-15 reverse stock split of shares of our Common Stock. The reverse stock split occurred, and shares of our Common Stock began trading on a split adjusted basis on Nasdaq as of the opening of trading on November 1, 2016.
On December 23, 2016, we entered into a common stock purchase agreement, or the 2016 Purchase Agreement, with Kalani Investments Limited, or Kalani. The 2016 Purchase Agreement provides that, upon the terms and subject to the conditions set forth therein, Kalani was committed to purchase up to $200.0 million worth of shares of our Common Stock over the 24-month term of the purchase agreement and would receive up to an aggregate of $1.5 million of shares of our Common Stock as a commitment fee in consideration for entering into the 2016 Purchase Agreement. As of January 31, 2017, we completed the sale to Kalani of the full $200.0 million worth of shares of our Common Stock under the 2016 Purchase Agreement, which then automatically terminated in accordance with its terms. Between the date of the 2016 Purchase Agreement, December 23, 2016, and January 30, 2017, we sold an aggregate of 32,418 shares of our Common Stock ( 254,159,520 shares before the 1-for-8, 1-for-4, 1-for-7, 1-for-5 and 1-for-7 reverse stock splits) to Kalani at an average price of approximately $6,169.35 per share, and issued an aggregate of 263 shares of Common Stock   (2,065,120 shares before the 1-for-8, 1-for-4, 1-for-7, 1-for-5 and 1-for-7 reverse stock splits) to Kalani as a commitment fee for entering into the 2016 Purchase Agreement .
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On January 18, 2017, our board of directors determined to effect a 1-for-8 reverse stock split of shares of our Common Stock. The reverse stock split occurred, and shares of our Common Stock began trading on a split adjusted basis on Nasdaq as of the opening of trading on January 23, 2017.
On February 17, 2017, we entered into a common stock purchase agreement, or the February 2017 Purchase Agreement, with Kalani. The February 2017 Purchase Agreement provided that, upon the terms and subject to the conditions set forth therein, Kalani was committed to purchase up to $200.0 million worth of shares of our Common Stock over the 24-month term of the purchase agreement and would receive up to an aggregate of $1.5 million of shares of our Common Stock as a commitment fee in consideration for entering into the February 2017 Purchase Agreement. As of March 17, 2017, we completed the sale to Kalani of the full $200.0 million worth of shares of our Common Stock under the February 2017 Purchase Agreement, which then automatically terminated in accordance with its terms. Between the date of the February 2017 Purchase Agreement, February 17, 2017, and March 16, 2017, we sold an aggregate of 117,293 shares of our Common Stock ( 114,947,079 shares before the 1-for-4, 1-for-7, 1-for-5 and 1-for-7 reverse stock splits) to Kalani at an average price of approximately $1,705.13 per share, and issued an aggregate of 872 shares of our Common Stock ( 854,631 shares before the 1-for-4, 1-for-7, 1-for-5 and 1-for-7 reverse stock splits) to Kalani as a commitment fee for entering into the February 2017 Purchase Agreement.
On April 3, 2017, we entered into a common stock purchase agreement, or the April 2017 Purchase Agreement, with Kalani. The April 2017 Purchase Agreement provided that, upon the terms and subject to the conditions set forth therein, Kalani was committed to purchase up to $226.4 million worth of shares of our Common Stock over the 24-month term of the purchase agreement and would receive up to an aggregate of $1.5 million of shares of our Common Stock as a commitment fee in consideration for entering into the April 2017 Purchase Agreement. As of August 4, 2017, we sold to Kalani $191.6 million worth of shares of our Common Stock under the April 2017 Purchase Agreement. Between the date of the April 2017 Purchase Agreement, April 3, 2017, and August 3, 2017, we sold an aggregate of 31,349,650 shares of our Common Stock ( 30,722,657,000 shares as adjusted for the 1-for-4, 1-for-7, 1-for-5 and 1-for-7 reverse stock splits) to Kalani at an average price of approximately $6.17 per share, and issued an aggregate of 42,630 shares of Common Stock (41,777,400 shares as adjusted for the 1-for-4, 1-for-7, 1-for-5 and 1-for-7 reverse stock splits) to Kalani as a commitment fee for entering into the April 2017 Purchase Agreement. On August 10, 2017, we terminated the April 2017 Purchase Agreement.
On April 6, 2017, our board of directors determined to effect a 1-for-4 reverse stock split of shares of our Common Stock. The reverse stock split occurred, and shares of our Common Stock began trading on a split adjusted basis on Nasdaq as of the opening of trading on April 11, 2017.
On May 2, 2017, our board of directors determined to effect a 1-for-7 reverse stock split of shares of our Common Stock. The reverse stock split occurred, and shares of our Common Stock began trading on a split adjusted basis on Nasdaq as of the opening of trading on May 11, 2017.
On June 16, 2017, our board of directors determined to effect a 1-for-5 reverse stock split of shares of our Common Stock. The reverse stock split occurred, and shares of our Common Stock began trading on a split adjusted basis on Nasdaq as of the opening of trading on June 22, 2017.
On July 18, 2017, our board of directors determined to effect a 1-for-7 reverse stock split of shares of our Common Stock. The reverse stock split occurred, and shares of our Common Stock began trading on a split adjusted basis on Nasdaq as of the opening of trading on July 21, 2017.
Description of Preferred Shares
Our Series A Convertible Preferred Stock that was outstanding until October 2011 accrued cumulative dividends on a quarterly basis at an annual rate of 6.75% of the aggregate face value. Dividends were payable in preferred stock or cash, if cash dividends have been declared on shares of our common stock. Such accrued dividends were payable in additional shares of preferred stock immediately prior to any conversion.
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Each share of Series A Convertible Preferred Stock entitled the holder to one vote on all matters submitted to a vote of our shareholders. Except as otherwise provided in the Certificate of Designations of Rights, Preferences and Privileges of Series A Convertible Preferred Stock, or by law, the holders of shares of Series A Convertible Preferred Stock and the holders of shares of our Common Stock voted together as one class on all matters submitted to a vote of our shareholders. Except as required by law, holders of Series A Convertible Preferred Stock had no special voting rights and their consent was not required (except to the extent they are entitled to vote with holders of shares of our Common Stock as described above) for taking any corporate action.
The Series A Convertible Preferred Stock ranked senior to all other series of our preferred stock as to the payment of dividends and the distribution of assets, unless the terms of any such series provided otherwise. The Series A Convertible Preferred Stock was not redeemable unless upon any liquidation, dissolution or winding up of the Company, or sale of all or substantially all of the Company's assets, in which case a one-to-one redemption would take place plus any accrued and unpaid dividends.
The holders of each share of Series B Convertible Preferred Stock were entitled to vote with the holders of each share of our common stock on all matters on which shares of our common stock were entitled to vote as a single class, and the shares of Series B Convertible Preferred Stock had five votes per share. The shares of Series B Convertible Preferred Stock were mandatorily convertible into shares of our common stock on a one to one basis within three months after the issuance thereof or any earlier date selected by us in our sole discretion. The Series B Convertible Preferred Stock had the same dividend and liquidation rights as shares of our common stock.
We entered into a secured revolving credit facility with Sifnos, an entity controlled by Mr. Economou, on October 21, 2015, or the Secured Revolving Credit Facility (n/k/a the Sierra Credit Facility) and subsequently amended it on November 11, 2015, pursuant to which we were initially permitted to borrow up to $60.0 million principal amount from Sifnos, as lender. Pursuant to the terms of the Secured Revolving Credit Facility, on December 30, 2015, we exercised our right to convert $10.0 million in aggregate principal of the Secured Revolving Credit Facility into 8 shares (100,000,000 before the 1-for-25, 1-for-4, 1-for-15, 1-for-8, 1-for-4, 1-for-7, 1-for-5 and 1-for-7 reverse stock splits) of our Series B Convertible Preferred Stock.
On March 24, 2016, we entered into an agreement to increase the maximum available amount under the Secured Revolving Credit Facility by $10.0 million to $70.0 million, and as part of the transaction we entered into a preferred stock exchange agreement to exchange the 8 Series B Convertible Preferred Shares ( 100,000,000 before the 1-for-25, 1-for-4, 1-for-15, 1-for-8, 1-for-4, 1-for-7, 1-for-5 and 1-for-7 reverse stock splits) held by the lender for $8.75 million. We subsequently canceled the Series B Preferred Shares, effective March 24, 2016.
On April 5, 2016 and September 9, 2016, the Secured Revolving Credit Facility was amended to include certain additional conversion mechanisms. Pursuant to the Secured Revolving Credit Facility, as amended, we had the option to elect, at any time prior to the maturity date of the Secured Revolving Credit Facility, to convert $8.75 million of the outstanding principal amount of loans into 29 shares (3,500,000 shares before the 1-for-15, 1-for-8, 1-for-4, 1-for-7, 1-for-5 and 1-for-7 reverse stock splits shares) shares of Series D Preferred Stock of the Company. On September 13, 2016, we elected to exercise our preferred stock rights pursuant to the Secured Revolving Credit Facility and issued 29 shares (3,500,000 shares before the 1-for-15, 1-for-8, 1-for-4, 1-for-7, 1-for-5 and 1-for-7 reverse stock splits shares) shares of Series D Preferred Stock to Sifnos.
Each share of Series D Preferred Stock was entitled to vote with shares of our Common Stock on all matters on which shares of our Common Stock are entitled to vote as a single class, and the shares of Series D Preferred Stock had 100,000 votes per share. Shares of Series D Preferred Stock had the same dividend and liquidation rights as shares of our Common Stock on a share-for-share basis. On August 29, 2017, Sifnos forfeited all outstanding shares of Series D Preferred Stock in connection with the Private Placement.
On June 8, 2016, we entered into a securities purchase agreement with an institutional investor for the sale of 5,000 Series C Convertible Preferred Shares, warrants to purchase an additional 5,000 Series C Convertible Preferred Shares and 0 shares of our common stock ( 148,998 shares before the 1-for-4, 1-for-15, 1-for-8, 1-for-4, 1-for-7, 1-for-5 and 1-for-7 reverse stock splits ) . On August 10, 2016, the institutional investor exercised the warrants and we issued an additional 5,000 Series C Convertible Preferred Shares.
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Our Series C Convertible Preferred Shares that were outstanding until November 2016, with respect to dividend rights and rights upon our liquidation, dissolution or winding up, ranked senior with respect to all shares of capital stock of the Company except for the Series E-1 and E-2 Convertible Preferred Shares, with which the Series C Convertible Preferred Shares ranked on a pari passu basis. Holders of the Series C Convertible Preferred Shares were entitled to dividends in the amount of 8.0% per annum, subject to an increase to 12% per annum upon the occurrence and continuance of certain triggering events. Dividends were payable monthly in shares of our Common Stock or cash, at our option.
The Series C Convertible Preferred Shares were initially convertible at any time at the option of the holder into shares of our Common Stock at an initial fixed conversion price of $2.75 per common share, subject to adjustment in accordance with the terms of the Series C Convertible Preferred Statement of Designations; provided, however, that if the volume weighted average price, or VWAP, of shares of our Common Stock on Nasdaq was below the fixed conversion price, subject to certain adjustments, then the holder was eligible to convert the Series C Convertible Preferred Shares at an alternate price equal to the higher of (x) 75.0% of the lowest daily VWAP on any trading day during the 21 consecutive trading day period ending on the trading day immediately prior to the conversion date and (y) $0.37.
The Series C Convertible Preferred Shares would not be converted, and shares of our Common Stock would not be issued in connection therewith, if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 4.99% of the outstanding shares of our Common Stock. If the Company was deemed to have issued or sold shares of our Common Stock, options, or convertible securities for a consideration per share less than the conversion price of the Series C Convertible Preferred Shares then in effect, the conversion price would be reduced to the deemed sale price of such securities.
Upon our liquidation, dissolution or winding up, holders of Series C Convertible Preferred Shares were entitled to be paid out of our assets, before any amount would be paid to the holders of any other shares of our capital stock except for Series E-1 and E-2 Convertible Preferred Shares, an amount per Series C Preferred Share equal to $1,000 plus any accrued but unpaid dividends thereon and the amount per share such holder would receive if such holder converted such Series C Convertible Preferred Shares into shares of our Common Stock immediately prior to the date of payment. Except as otherwise required by law (or with respect to approval of certain actions as set forth in the Series C Convertible Preferred Statement of Designations), the Series C Convertible Preferred Shares did not have voting rights.
As of November 18, 2016, all of our outstanding Series C Convertible Preferred Shares had been converted into an aggregate of 29 shares of our Common Stock ( 13,774,560 shares before the 1-for-4, 1-for-15, 1-for-8, 1-for-4, 1-for-7, 1-for-5 and 1-for-7 reverse stock splits) in accordance with the terms of the Statement of Designations of the Series C Convertible Preferred Shares.
On November 16, 2016, we entered into a securities purchase agreement with Kalani for the sale of 20,000 Series E-1 Convertible Preferred Shares; Series E-1 Preferred Warrants to purchase 30,000 Series E-1 Convertible Preferred Shares; Series E-2 Preferred Warrants to purchase 50,000 Series E-2 Convertible Preferred Shares; Series F-1 and F-2 Prepaid Warrants to initially purchase an aggregate of 47 shares of our Common Stock ( 372,872 shares before the 1-for-8, 1-for-4, 1-for-7, 1-for-5 and 1-for-7 reverse stock splits) , with the number of shares of our common stock issuable subject to adjustment as described therein; and 0 shares of our common stock ( 96 shares before the 1-for-8, 1-for-4, 1-for-7, 1-for-5 and 1-for-7 reverse stock splits) . The gross proceeds from the sale of the securities, including all of the preferred warrants exercised in the transaction amounted to $100.0 million.
We initially issued 20,000 shares of Series E-1 Convertible Preferred Shares and had 30,000 additional shares of Series E-1 Convertible Preferred Shares available to be issued pursuant to our Statement of Designations of the Series E-1 Preferred Shares and Series E-1 Preferred Warrants (as discussed below). The Series E-1 Convertible Preferred Shares were convertible at any time at the option of the holder into shares of our Common Stock at an initial fixed conversion price of $30.00 per common share; provided, however, that if the VWAP of the shares of our common stock on Nasdaq was below $30.00 (subject to certain adjustments), then the holder had the option to convert the Series E-1 Convertible Preferred Shares at an alternate price equal to the higher of (x) 77.5% of the lowest daily VWAP on any trading day during the 14 consecutive trading day period ending on the trading day immediately prior to the conversion date and (y) $1.50. At any time, the Company was able to redeem all, but not less than all, of the Series E-1 Convertible Preferred Shares on the terms described in the Statement of Designations of the Series E-1 Convertible Preferred Shares. An additional 30,000 Series E-1 Convertible Preferred Shares were subsequently issued upon exercise of our Series E-1 Preferred Warrants.
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Further, 50,000 Series E-2 Convertible Preferred Shares were issued upon exercise of our Series E-2 Preferred Warrants (as described below) and our Statement of Designations of the Series E-2 Preferred Shares with respect thereto. The Series E-2 Convertible Preferred Shares were convertible at any time at the option of the holder into shares of our Common Stock at an initial fixed conversion price of $30.00 per common share; provided, however, that if the VWAP of the shares of our common stock on Nasdaq was below $30.00 (subject to certain adjustments), then the holder had the option to convert the Series E-2 Convertible Preferred Shares at an alternate price equal to the higher of (x) 85.0% of the lowest daily VWAP on any trading day during the 21 consecutive trading day period ending on the trading day immediately prior to the conversion date and (y) $1.50. At any time, the Company was able to redeem all, but not less than all, of the Series E-2 Convertible Preferred Shares on the terms described in the Statement of Designations of the Series E-2 Convertible Preferred Shares.
The Series E-1 Preferred Warrants were exercisable into up to 30,000 Series E-1 Convertible Preferred Shares at any time at the option of the holder thereof at an exercise price of $1,000 per Series E-1 Convertible Preferred Share, and would expire two years after the date of issuance of such warrant.
The Series E-2 Preferred Warrants were exercisable into up to 50,000 Series E-2 Convertible Preferred Shares at any time at the option of the holder thereof at an exercise price of $1,000 per Series E-2 Convertible Preferred Share, and would expire two years after the date of issuance of such warrant.
In connection with the purchase of Series E-1 Convertible Preferred Shares, we also agreed to issue to Kalani additional shares of our Common Stock equal to 1.5% of the quotient of (x) the Aggregate Exercise Price (as defined in the Series E-1 Preferred Warrants) paid to us in connection with an exercise of the Series E-1 Preferred Warrants, divided by (y) the Alternate Conversion Price (as defined in the Series E-1 Convertible Preferred Shares Statement of Designations), which Kalani agreed to accept in the form of a prepaid Series F-1 Common Warrant, or the Additional F-1 Common Shares. Initially, the Series F-1 Common Warrant was only exercisable into one (1) share of our common stock ( 9,896 shares before the 1-for-8, 1-for-4, 1-for-7, 1-for-5 and 1-for-7 reverse stock splits) , which together with the zero (0) shares (96 shares before the 1-for-8, 1-for-4, 1-for-7, 1-for-5 and 1-for-7 reverse stock splits) of our common stock issued to Kalani initially, represented the one (1) share ( 9,992 shares before the 1-for-8, 1-for-4, 1-for-7, 1-for-5 and 1-for-7 reverse stock splits) issuable at a deemed price of $30.00 per share in connection with the initial issuance of Series E-1 Convertible Preferred Shares. Upon each exercise of the Series E-1 Preferred Warrants, the related Additional F-1 Convertible Common Shares became exercisable thereunder. No consideration was required to be paid upon any exercise of the Series F-1 Common Warrants.
In connection with the purchase of Series E-2 Convertible Preferred Shares, we also agreed to issue to Kalani additional shares of our Common Stock equal to 1.5% of the quotient of (x) the Aggregate Exercise Price (as defined in the Series E-2 Preferred Warrants) paid to us in connection with an exercise of the Series E-2 Preferred Warrants, divided by (y) the Alternate Conversion Price (as defined in the Series E-2 Convertible Preferred Shares Statement of Designations), which Kalani agreed to accept in the form of a prepaid Series F-2 Common Warrant, or the Additional F-2 Common Shares. Initially, the Series F-2 Common Warrant was not exercisable into any shares of our common stock. Upon each exercise of the Series E-2 Preferred Warrants, the related Additional F-2 Convertible Common Shares became exercisable thereunder.
As of December 12, 2016, all of the Series E-1 Preferred Warrants to purchase 30,000 Series E-1 Convertible Preferred Shares, Series E-2 Preferred Warrants to purchase 50,000 Series E-2 Convertible Preferred Shares and related Series F-1 and F-2 Prepaid Warrants to purchase shares of our Common Stock have been exercised and the Series E-1 Convertible Preferred Shares and Series E-2 Convertible Preferred Shares had been converted into an aggregate of 873 shares of our Common Stock ( 6,850,816 shares before the 1-for-8, 1-for-4, 1-for-7, 1-for-5 and 1-for-7 reverse stock splits) in accordance with the terms of the Certificate of Designations of the Series E-1 and E-2 Convertible Preferred Shares.
Our Articles of Incorporation and Bylaws
Our purpose, as stated in Section B of our Amended and Restated Articles of Incorporation, is to engage in any lawful act or activity for which corporations may now or hereafter be organized under the Marshall Islands Business Corporations Act. Our Amended and Restated Articles of Incorporation and Amended and Restated Bylaws do not impose any limitations on the ownership rights of our shareholders.
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Directors
Our directors are elected by a plurality of the votes cast by shareholders entitled to vote in an election. Our Amended and Restated Articles of Incorporation provide that cumulative voting shall not be used to elect directors. Our board of directors must consist of at least three members. The exact number of directors is fixed by a vote of at least 66 2/3% of the entire board. Our Amended and Restated Bylaws provide for a staggered board of directors whereby directors shall be divided into three classes: Class A, Class B and Class C which shall be as nearly equal in number as possible. Shareholders, acting as at a duly constituted meeting, or by unanimous written consent of all shareholders, initially designated directors as Class A, Class B or Class C. The term of our directors designated Class A directors expires at our 2020 annual meeting of shareholders. Class B directors serve for a term expiring at our 2018 annual meeting of shareholders. Directors designated as Class C directors serve for a term expiring at our 2019 annual meeting of shareholders. At annual meetings for each initial term, directors to replace those whose terms expire at such annual meetings will be elected to hold office until the third succeeding annual meeting. Each director serves his respective term of office until his successor has been elected and qualified, except in the event of his death, resignation, removal or the earlier termination of his term of office. Our board of directors has the authority to fix the amounts which shall be payable to the members of the board of directors for attendance at any meeting or for services rendered to us.
Under our Second Amended and Restated Bylaws, no contract or transaction between the Company and one or more of our directors or officers, or between the Company and any other corporation, partnership, association or other organization of which one or more of our directors or officers are directors or officers or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of our board of directors or a committee thereof which authorizes the contract or transaction, or solely because his or her or their votes are counted for such purpose, if: (i) the material facts as to his or her or their relationship or interest as to the contract or transaction are disclosed or are known to our board or directors or the applicable committee thereof and the board of directors or such committee, as applicable, in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, or, if the votes of the disinterested directors are insufficient to constitute an act of the board of directors as defined under the BCA, then by unanimous vote of the disinterested directors; (ii) the material facts as to his or her or their relationship or interest as to the contract or transaction are disclosed or are known to the Company's shareholders, and the contract or transaction is specifically approved in good faith by vote of the shareholders; or (iii) the contract or transaction is fair as to the Company as of the time it is authorized, approved or ratified by our board of directors, a committee thereof or our shareholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board of directors or of a committee thereof that authorizes the contract or transaction.
Shareholder Meetings
Under our Second Amended and Restated Bylaws, annual shareholders meetings will be held at a time and place selected by our board of directors. The meetings may be held in or outside of the Marshall Islands. Our board of directors may set a record date between 15 and 60 days before the date of any meeting to determine the shareholders that will be eligible to receive notice and vote at the meeting.
Dissenters; Rights of Appraisal and Payment
Under the BCA, our shareholders have the right to dissent from various corporate actions, including any merger or consolidation or sale of all or substantially all of our assets not made in the usual course of our business, and receive payment of the fair value of their shares. However, the right of a dissenting shareholder to receive payment of the appraised fair value of his shares is not available under the BCA for the shares of any class or series of stock, which shares or depository receipts in respect thereof, at the record date fixed to determine the shareholders entitled to receive notice of and to vote at the meeting of the shareholders to act upon the agreement of merger or consolidation, were either (i) listed on a securities exchange or admitted for trading on an interdealer quotation system or (ii) held of record by more than 2,000 holders. In the event of any further amendment of our Amended and Restated Articles of Incorporation, a shareholder also has the right to dissent and receive payment for the shareholder's shares if the amendment alters certain rights in respect of those shares. The dissenting shareholder must follow the procedures set forth in the BCA to receive payment. In the event that we and any dissenting shareholder fail to agree on a price for the shares, the BCA procedures involve, among other things, the institution of proceedings in any appropriate court in any jurisdiction in which our Common Stock is primarily traded on a local or national securities exchange.
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Shareholders' Derivative Actions
Under the BCA, any of our shareholders may bring an action in our name to procure a judgment in our favor, also known as a derivative action, provided that the shareholder bringing the action is a holder of shares of our common stock both at the time the derivative action is commenced and at the time of the transaction to which the action relates.
Indemnification of Officers and Directors
Our Amended and Restated Bylaws include a provision that entitles any director or officer of the Company to be indemnified by the Company upon the same terms, under the same conditions and to the same extent as authorized by the BCA if he or she acted in good faith and in a manner reasonably believed to be in and not opposed to the best interests of the Company, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
We are also authorized to carry directors' and officers' insurance as a protection against any liability asserted against our directors and officers acting in their capacity as directors and officers regardless of whether the Company would have the power to indemnify such director or officer against such liability by law or under the provisions of our Amended and Restated Bylaws. We believe that these indemnification provisions and insurance are useful to attract and retain qualified directors and executive officers.
The indemnification provisions in our Second Amended and Restated Bylaws may discourage shareholders from bringing a lawsuit against directors for breach of their fiduciary duty. These provisions may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our shareholders. There is currently no pending material litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought.
Anti-takeover Provisions
Several provisions of our Amended and Restated Articles of Incorporation and Second Amended and Restated Bylaws, as well as the provisions of our preferred share purchase rights, may have anti-takeover effects. These provisions are intended to avoid costly takeover battles, lessen our vulnerability to a hostile change of control and enhance the ability of our board of directors to maximize shareholder value in connection with any unsolicited offer to acquire us. However, these anti-takeover provisions, which are summarized below, could also discourage, delay or prevent (1) the merger or acquisition of our company by means of a tender offer, a proxy contest or otherwise, that a shareholder may consider in its best interest and (2) the removal of incumbent officers and directors.
Blank Check Preferred Stock
Under the terms of our Amended and Restated Articles of Incorporation, our board of directors has authority, without any further vote or action by our shareholders, to issue up to 500,000,000 shares of blank check preferred stock. Our board of directors may issue additional shares of preferred stock on terms calculated to discourage, delay or prevent a change of control of our company or the removal of our management.
Classified Board of Directors
Our Amended and Restated Articles of Incorporation provide for a board of directors serving staggered, three-year terms. Approximately one-third of our board of directors will be elected each year. The classified board provision could discourage a third party from making a tender offer for our shares or attempting to obtain control of our Company. It could also delay shareholders who do not agree with the policies of the board of directors from removing a majority of the board of directors for two years.
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Election and Removal of Directors
Our Amended and Restated Articles of Incorporation prohibit cumulative voting in the election of directors. Further, our Second Amended and Restated Bylaws require shareholders to give advance written notice of nominations for the election of directors. Our Second Amended and Restated Bylaws also provide that our directors may be removed only for cause and only upon affirmative vote of the holders of at least 66 2 / 3 % of the outstanding voting shares of the Company. These provisions may discourage, delay or prevent the removal of incumbent officers and directors.
Limited Actions by Shareholders
Under the BCA and our Second Amended and Restated Bylaws, any action required or permitted to be taken by our shareholders must be effected at an annual or special meeting of shareholders or by the unanimous written consent of our shareholders. Our Second Amended and Restated Bylaws provide that, unless otherwise prescribed by law, only a majority of our board of directors, the chairman of our board of directors or the President may call special meetings of our shareholders, and the business transacted at the special meeting is limited to the purposes stated in the notice. Accordingly, a shareholder may be prevented from calling a special meeting of shareholders for shareholder consideration of a proposal over the opposition of our board of directors and shareholder consideration of a proposal may be delayed until the next annual meeting of shareholders.
Advance Notice Requirements for Shareholder Proposals and Director Nominations
Our Second Amended and Restated Bylaws provide that shareholders seeking to nominate candidates for election as directors or to bring business before an annual meeting of shareholders must provide timely notice of their proposal in writing to the corporate secretary. Generally, to be timely, a shareholder's notice must be received at our principal executive offices not less than 150 days nor more than 180 days prior to the one year anniversary of the preceding year's annual meeting of shareholders. Our Second Amended and Restated Bylaws also specify requirements as to the form and content of a shareholder's notice. These provisions may impede shareholders' ability to bring matters before an annual meeting of shareholders or make nominations for directors at an annual meeting of shareholders.
Description of Preferred Share Purchase Rights
Each share of Common Stock includes one right, which we refer to as a "Series A Right," that entitles the holder to purchase from us one-thousandth of a share of our Series A Participating Preferred Stock at an exercise price that was initially set at $130.00 and is subject to adjustments described in the Rights Agreement (defined below). The Series A Rights were initially issued pursuant to a Stockholders Rights Agreement, dated January 18, 2008, or the Rights Agreement, with American Stock Transfer & Trust Company, as rights agent, or the Series A Rights Agent. Until a Series A Right is exercised, the holder of a Series A Right will have no rights to vote or receive dividends or any other shareholder rights.
The Series A Rights may have anti-takeover effects. The Series A Rights will cause substantial dilution to any person or group that attempts to acquire us without the approval of our board of directors. As a result, the overall effect of the Series A Rights may be to render more difficult or discourage any attempt to acquire us. Because our board of directors can approve a redemption of the Series A Rights for a permitted offer, the Series A Rights should not interfere with a merger or other business combination approved by our board of directors. We have summarized the material terms and conditions of the Rights Agreement and the Series A Rights below. For a complete description of the Series A Rights, we encourage you to read the Rights Agreement, which we have filed as an exhibit to the Registration Statement on Form 8-A filed with the Commission on January 18, 2008 . As of August 30, 2017, no exercise of any Series A Rights had occurred.
S-43


 
Detachment of the Series A Rights
The Series A Rights are attached to all certificates representing our currently outstanding shares of our Common Stock and will attach to all certificates of shares of our Common Stock we issue prior to the Series A Rights distribution date that we describe below. The Series A Rights are not exercisable until after the Series A Rights distribution date and will expire at the close of business on the tenth anniversary date of the adoption of the rights plan, unless we redeem or exchange them earlier as we describe below. The Series A Rights will separate from shares of our Common Stock and a Series A Rights distribution date would occur, subject to specified exceptions, on the earlier of the following two dates:
·
the 10th day after public announcement that a person or group has acquired ownership of 15.0% or more of shares of our Common Stock or
·
the 10th business day (or such later date as determined by our board of directors) after a person or group announces a tender or exchange offer which would result in that person or group holding 15.0% or more of shares of our Common Stock.

Any person or group who acquires ownership of 15.0% or more of shares of our Common Stock shall be deemed an "Acquiring Person," but shall not include the Company, or anyone excepted from such definition in the Rights Agreement.
Persons who are the beneficial owner of 15.0% or more of shares of our Common Stock on the effective date of the Rights Agreement are excluded from the definition of "Acquiring Person," until such time as they acquire an additional 5.0% of the outstanding shares of our Common Stock for purposes of the Series A Rights, subject to certain exceptions, and therefore until such time, their ownership cannot trigger the Series A Rights. Specified "inadvertent" owners that would otherwise become an acquiring person, including those who would have this designation as a result of repurchases of shares of our common stock by us, will not become Acquiring Persons as a result of those transactions, as described in detail in the Rights Agreement.
On July 9, 2009, the Rights Agreement was amended to exempt from the definition of "Acquiring Person" persons acquiring our Series A Convertible Preferred Stock and any shares of our Common Stock resulting from the conversion of any such preferred stock, subject to certain exceptions. On April 21, 2010, the Rights Agreement was further amended to exempt from the definition of "Acquiring Person" any persons acting (i) as a broker, dealer, distributor or initial purchaser or underwriter of our securities or as a market-maker with respect to such securities or (ii) in connection with share lending agreements or similar agreements between us or any of our affiliates and such person or any of such person's affiliates or associates, subject to certain exceptions. On August 28, 2017, in connection with the Private Placement and this Rights Offering, the Rights Agreement was further amended to exempt from the definition of "Acquiring Person" Mr. George Economou, the Company's Chairman and Chief Executive Officer, and any entity under the common control or affiliated with Mr. Economou and any subsidiary of any entity under the common control or affiliated with Mr. Economou.
Our board of directors may defer the Series A Rights distribution date in some circumstances, and some inadvertent acquisitions will not result in a person becoming an Acquiring Person if the person promptly divests itself of a sufficient number of shares of our Common Stock.
Until the Series A Rights distribution date:
·
certificates of shares of our Common Stock will evidence the Series A Rights, and the Series A Rights will be transferable only with those certificates; and
·
any new shares of Common Stock will be issued with Series A Rights and new certificates will contain a notation incorporating the Rights Agreement by reference.
S-44


 
As soon as practicable after the Series A Rights distribution date, the Series A Rights agent will mail certificates representing the Series A Rights to holders of record of shares of our Common Stock at the close of business on that date. After the Series A Rights distribution date, only separate Series A Rights certificates will represent the Series A Rights.
We will not issue Series A Rights with any shares of our Common Stock we issue after the Series A Rights distribution date, except as our board of directors may otherwise determine.
Flip-In Event
A "flip-in event" will occur under the Rights Agreement when a person becomes an Acquiring Person other than pursuant to certain kinds of permitted offers. An offer is permitted under the Rights Agreement if a person will become an Acquiring Person pursuant to a merger or other acquisition agreement that has been approved by our board of directors prior to that person becoming an Acquiring Person.
If a flip-in event occurs and we have not previously redeemed the Series A Rights as described under the heading "Redemption of Rights" below or, if the Acquiring Person acquires less than 50.0% of the outstanding shares of our Common Stock and we do not exchange the Series A Rights as described under the heading "Exchange of Rights" below, each Series A Right, other than any Series A Right that has become void, as we describe below, will become exercisable at the time it is no longer redeemable for the number of shares of our Common Stock, or, in some cases, cash, property or other of our securities, having a current market price equal to two times the exercise price of such Series A Right.
When a flip-in event occurs, all Series A Rights that then are, or in some circumstances that were, beneficially owned by or transferred to an Acquiring Person or specified related parties will become void in the circumstances the Rights Agreement specifies.
Flip-Over Event
A "flip-over event" will occur under the Rights Agreement when, at any time after a person has become an Acquiring Person:
·
we are acquired in a merger or other business combination transaction, other than specified mergers that follow a permitted offer of the type we describe above; or
·
50% or more of our assets or earning power is sold or transferred.

If a flip-over event occurs, each holder of a Series A Right, other than any Series A Right that has become void as we describe under the heading "Flip-In Event" above, will have the Series A Right to receive the number of shares of commons stock of the acquiring company which has a current market price equal to two times the exercise price of such Series A Right.
Anti-dilution
The number of outstanding Series A Rights associated with shares of our Common Stock is subject to adjustment for any stock split, stock dividend or subdivision, combination or reclassification of shares of our Common Stock occurring prior to the Series A Rights distribution date. With some exceptions, the Rights Agreement will not require us to adjust the exercise price of the Series A Rights until cumulative adjustments amount to at least 1.0% of the exercise price of the Series A Rights. The Rights Agreement does not require us to issue fractional shares of our preferred shares that are not integral multiples of one-thousandth of a share, instead we may make a cash adjustment based on the market price of the shares of our Common Stock on the last trading date prior to the date of exercise.
S-45


 
Redemption of Series A Rights
At any time until the date on which the occurrence of a flip-in event is first publicly announced, we may order redemption of the Series A Rights in whole, but not in part, at a redemption price that was initially set at $0.001 per Series A Right and is subject to adjustments described in the Rights Agreement. The redemption price is subject to adjustment for any stock split, stock dividend or similar transaction occurring before the date of redemption. At our option, we may pay that redemption price in cash or shares of our Common Stock. The Series A Rights are not exercisable after a flip-in event if they are timely redeemed by us or until ten days following the first public announcement of a flip-in event. If our board of directors timely orders the redemption of the Series A Rights, the Series A Rights will terminate on the effectiveness of that action.
Exchange of Series A Rights
We may, at our option, exchange the Series A Rights (other than Series A Rights owned by an Acquiring Person or an affiliate or an associate of an Acquiring Person, which have become void), in whole or in part. The exchange will be at an exchange ratio of one common share per Series A Right, subject to specified adjustments at any time after the occurrence of a flip-in event and prior to any person other than us or our existing shareholders becoming the beneficial owner of 50.0% or more of the outstanding shares of our common stock for the purposes of the Rights Agreement.
Amendment of Terms of Series A Rights
During the time the Series A Rights are redeemable, we may amend any of the provisions of the Rights Agreement. Once the Series A Rights cease to be redeemable, we generally may amend the provisions of the Rights Agreement only as follows:
·
to cure any ambiguity, defect or inconsistency;
·
to make changes that do not materially adversely affect the interests of holders of Series A Rights, excluding the interests of any Acquiring Person; or
·
to shorten or lengthen any time period under the Rights Agreement, except that we cannot lengthen the time period governing redemption and we may only lengthen any time period for the purpose of protecting, enhancing or clarifying the right of and/or the benefits to the holders of the Series A Rights (other than the Acquiring Person).

Transfer Agent
The U.S. transfer agent for shares of our Common Stock is American Stock Transfer & Trust Company LLC.

 

S-46

EXPENSES RELATING TO THIS OFFERING
Set forth below is an itemization of the total expenses that we expect to incur in connection with the Rights Offering. With the exception of the Commission registration fee, all amounts are estimates.
Commission registration fee
 
$
16,200
*
Legal and advisory fees and expenses
 
$
75,000
 
Subscription Agent and Information Agent fees
 
$
30,000
 
Printing and miscellaneous
 
$
20,000
 
Total
 
$
141,200
 

*Previously paid.
LEGAL MATTERS
The validity of the securities offered by this prospectus supplement and certain other legal matters relating to United States law are being passed upon for us by Seward & Kissel LLP, New York, New York.
EXPERTS
The consolidated financial statements of DryShips Inc. appearing in DryShips Inc.'s annual report (Form 20-F) for the year ended December 31, 2016 and the effectiveness of DryShips Inc.'s internal control over financial reporting as of December 31, 2016 have been audited by Ernst & Young (Hellas) Certified Auditors Accountants S.A., independent registered public accounting firm, as set forth in their reports thereon included therein, and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such reports given on the authority of such firm as experts in accounting and auditing. The address of Ernst & Young (Hellas) Certified Auditors Accountants S.A. is 8B Chimarras Street, 15125 Maroussi, Greece and is registered as a corporate body with the public register for company auditors-accountants kept with the Body of Certified-Auditors- Accountants, or SOEL, Greece with registration number 107.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
As required by the Securities Act, we filed a registration statement relating to the securities offered by this prospectus supplement with the Commission. This prospectus supplement and the accompanying prospectus are a part of that registration statement, which includes additional information.
Government Filings
We file annual and special reports with the Commission. You may read and copy any document that we file and obtain copies at prescribed rates from the Commission's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling 1 (800) SEC-0330. The Commission maintains a website ( http://www.sec.gov ) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the Commission. Our filings are also available on our website at http://www.dryships.com/ . The information on our website, however, is not, and should not be deemed to be, a part of this prospectus.
This prospectus supplement and the accompanying prospectus are part of a registration statement that we filed with the Commission and do not contain all of the information in the registration statement. The full registration statement may be obtained from the Commission or us, as indicated below. Statements in this prospectus supplement or the accompanying prospectus about these documents are summaries and each statement is qualified in all respects by reference to the document to which it refers. You should refer to the actual documents that are filed as exhibits to this registration statement for a more complete description of the relevant matters. You may inspect a copy of the registration statement at the Commission's Public Reference Room in Washington, D.C., as well as through the Commission's website.
S-47


Information Incorporated by Reference
We disclose important information to you by referring you to documents that we have previously filed with the Commission. The information incorporated by reference is considered to be part of this prospectus supplement and the accompanying prospectus, an d information that we file later with the Commission prior to the termination of this offering will also be considered to be part of this prospectus supplement and the accompanying prospectus and will automatically update and supersede previously filed information, including information contained in this document.
We hereby incorporate by reference the following documents:
·
our Annual Report on Form 20-F for the year ended December 31, 2016, filed with the Commission on March 13, 2017, as amended on April 28, 2017, containing our audited consolidated financial statements for the most recent fiscal year for which those statements have been filed.
·
our Report on Form 6-K, filed with the Commission on May 10, 2017, which contains our unaudited condensed consolidated interim financial statements as of and for the three months ended March 31, 2017.
·
our Report on Form 6-K, filed with the Commission on August 31, 2017, which contains our unaudited condensed consolidated interim financial statements as of and for the six months ended June 30, 2017.
·
our Report on Form 6-K, filed with the Commission on August 31, 2017, which contains a copy of the Purchase Agreement.
You should rely only on the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus supplement and the accompanying prospectus as well as the information we previously filed with the Commission and incorporated by reference, is accurate as of the dates on the front cover of those documents only. Our business, financial condition and results of operations and prospects may have changed since those dates.
You may request a free copy of the above mentioned filings or any subsequent filings we incorporated by reference into this prospectus supplement by writing or telephoning us at the following address:
DryShips Inc.
109 Kifisias Avenue and Sina Street
151 24, Marousi
Athens, Greece
+ 011 30 210 80 90 570
ATTN: Vice President of Finance

Information Provided by the Company
We will furnish holders of shares of our Common Stock with annual reports containing audited financial statements and a report by our independent registered public accounting firm. The audited financial statements will be prepared in accordance with U.S. generally accepted accounting principles. As a "foreign private issuer," we are exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements to shareholders. While we furnish proxy statements to shareholders in accordance with the rules of the Nasdaq Capital Market, those proxy statements do not conform to Schedule 14A of the proxy rules promulgated under the Exchange Act. In addition, as a "foreign private issuer," our officers and directors are exempt from the rules under the Exchange Act relating to short swing profit reporting and liability.
S-48

 
Prospectus
DRYSHIPS INC.

Common Shares, Preferred Share Purchase
Rights, Preferred Shares, Debt Securities, Guarantees,
Warrants, Purchase Contracts, Rights and Units
Through this prospectus, we may periodically offer:
(1)
shares of our common stock, including related preferred stock purchase rights;
(2)
shares of our preferred stock;
(3)
our debt securities, which may be guaranteed by one or more of our subsidiaries;
(4)
our warrants;
(5)
our purchase contracts;
(6)
our rights; and
(7)
our units.
The aggregate offering price of all securities issued and sold by us under this prospectus may not exceed $1,000,000,000.  In addition, the selling shareholders, who will be named in a prospectus supplement, may sell in one or more offerings pursuant to this registration statement up to an aggregate of 133,531,742 of our common shares.  The prices and terms of the securities that we or any selling shareholder will offer will be determined at the time of their offering and will be described in a supplement to this prospectus.  We will not receive any of the proceeds from the sale of securities by any selling shareholder.
Our common shares are currently listed on the NASDAQ Global Select Market under the symbol "DRYS."
An investment in these securities involves a high degree of risk.  See the section entitled "Risk Factors" beginning on page 12 of this prospectus, and other risk factors contained in the applicable prospectus supplement and in the documents incorporated by reference herein and therein.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is May 7, 2015.

 
 
TABLE OF CONTENTS
 
 
Page
Prospectus Summary
1
Risk Factors
12
Cautionary Statement Regarding Forward-Looking Statements
61
Per Share Market Price Information
63
Ratio of Earnings to Fixed Charges
64
Capitalization
65
Use of Proceeds
66
Plan of Distribution
67
Selling Shareholders
69
Enforcement of Civil Liabilities
70
Description of Capital Stock
71
Description of Debt Securities
79
Description of Warrants
89
Description of Purchase Contracts
90
Description of Rights
91
Description of Units
92
Expenses
93
Legal Matters
94
Experts
95
Where You Can Find Additional Information
96
 

Unless otherwise indicated, all references to "dollars" and "$" in this prospectus are to U.S. Dollars, and the financial statements incorporated by reference herein are presented in U.S. dollars and have been prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP.
This prospectus is part of a registration statement that we filed with the U.S. Securities and Exchange Commission, or the SEC, using a shelf registration process.  Under the shelf registration process, we may sell our common shares (including related preferred stock purchase rights), preferred shares, debt securities (and related guarantees), warrants, purchase contracts, rights and units and the selling shareholders may sell our common shares that are described in this prospectus from time to time in one or more offerings.  This prospectus only provides you with a general description of the securities we or any selling shareholder may offer.  Each time we or any selling shareholder offer securities, we will provide you with a supplement to this prospectus that will describe the specific information about the securities being offered and the specific terms of that offering.  The supplement may also add, update or change the information contained in this prospectus.  If there is any inconsistency between the information in this prospectus and any prospectus supplement, you should rely on the prospectus supplement.  Before purchasing any securities, you should read carefully both this prospectus and any prospectus supplement, together with the additional information described below.
This prospectus and any prospectus supplement are part of a registration statement we filed with the SEC and do not contain all the information in the registration statement.  Forms of the indentures and other documents establishing the terms of the offered securities are filed as exhibits to the registration statement.  Statements in this prospectus or any prospectus supplement about these documents are summaries and each statement is qualified in all respects by reference to the document to which it refers.  You should refer to the actual documents for a more complete description of the relevant matters.  For further information about us or the securities offered hereby, you should refer to the registration statement, which you can obtain from the SEC as described below under the section entitled "Where You Can Find Additional Information."
You should rely only on the information contained or incorporated by reference in this prospectus and in any prospectus supplement.  We, the selling shareholders, and any underwriters have not authorized any other person to provide you with different information.  If anyone provides you with different or inconsistent information, you should not rely on it.  You should assume that the information appearing in this prospectus and the applicable supplement to this prospectus is accurate as of the date on its respective cover, and that any information incorporated by reference is accurate only as of the date of the document incorporated by reference, unless we indicate otherwise.  Our business, financial condition, results of operations and prospects may have changed since those dates.
Other than in the United States, no action has been taken by us or any underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required.  The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction.  Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus.  This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.


PROSPECTUS SUMMARY
This section summarizes some of the information that is contained later in this prospectus or in other documents incorporated by reference into this prospectus. As an investor or prospective investor, you should review carefully the risk factors and the more detailed information that appears later in this prospectus or is contained in the documents that we incorporate by reference into this prospectus.
Unless the context otherwise requires, as used in this prospectus, the terms "we" "our," "us," and the "Company" refer to DryShips Inc. and all of its subsidiaries.  "DryShips Inc." refers only to DryShips Inc. and not its subsidiaries.  References to "Ocean Rig" or "Ocean Rig UDW" refer to Ocean Rig UDW Inc., our majority owned subsidiary.
We use the term deadweight, or "dwt," in describing the size of vessels. Dwt, expressed in metric tons each of which is equivalent to 1,000 kilograms, refers to the maximum weight of cargo and supplies that a vessel can carry.
Our Company
We are a Marshall Islands corporation with our principal executive offices in Athens, Greece and were incorporated in September 2004.  We are an international provider of ocean transportation services for drybulk and petroleum cargoes through our ownership and operation of drybulk carrier vessels and oil tankers and offshore drilling services through the ownership and operation by our majority-owned subsidiary, Ocean Rig UDW, of ultra-deepwater drilling units.  Our common stock is listed on the NASDAQ Global Select Market where it trades under the symbol "DRYS."
As of March 5, 2015, we owned a fleet of (i) 39 drybulk carriers, comprised of 13 Capesize, 24 Panamax and 2 Supramax vessels, which have a combined deadweight tonnage of approximately 4.3 million dwt and an average age of approximately 9.5 years, (ii) 10 tankers, comprised of 4 Suezmax and 6 Aframax vessels, which have a combined deadweight tonnage of approximately 1.3 million dwt and an average age of approximately 2.9 years and (iii) 10 drilling units, comprised of two modern, fifth generation, advanced capability ultra-deepwater semisubmersible offshore drilling rigs, four sixth generation, advanced capability ultra-deepwater drillships and four seventh generation, advanced capability ultra-deepwater drillships.
As of March 5, 2015, we had entered into contracts for the construction of (i) three seventh generation drillships, two of which are new integrated design drillships and all are equipped with two blow-out preventers, scheduled for delivery in June 2016, February 2017 and June 2017, respectively.
Our drybulk carriers, drilling units and oil tankers operate worldwide within the trading limits imposed by our insurance terms and do not operate in areas where United States, European Union or United Nations sanctions have been imposed.
Ocean Rig UDW comprises our entire offshore drilling segment, which represented approximately 78.0% of our total assets and approximately 83.1% of our total revenues for the year ended December 31, 2014. As we have done in the past, we may, in the future, sell a minority voting and economic interest in Ocean Rig UDW in a public offering or distribute, or spin off, a minority voting and economic interest in Ocean Rig UDW to holders of our voting stock. There can be no assurance, however, that we will complete any such transaction, which, among other things, will be subject to market conditions.
1



Recent Developments
Nasdaq Listing
On April 13, 2015, we received written notification from The Nasdaq Stock Market, or Nasdaq, indicating that because the closing bid price of our common stock for the last 30 consecutive business days was below $1.00 per share, we no longer meet the minimum bid price requirement for the Nasdaq Global Select Market, set forth in Nasdaq Listing Rule 5450(a)(1).  Pursuant to the Nasdaq Listing Rules, the applicable grace period to regain compliance is 180 days, or until October 12, 2015.
We intend to monitor the closing bid price of our common stock between now and October 12, 2015 and consider our options, including a reverse stock split, in order to regain compliance with the Nasdaq Global Select Market minimum bid price requirement. We can cure this deficiency if the closing bid price of our common stock is $1.00 per share or higher for at least ten consecutive business days during the grace period. In the event we do not regain compliance within the 180-day grace period and we meet all other listing standards and requirements, we may be eligible for an additional 180-day grace period if we transfer to the Nasdaq Capital Market.
We intend to cure the deficiency within the prescribed grace period. During this time, the Company's common stock will continue to be listed and trade on the Nasdaq Global Select Market.
Sale of tankers
On March 30, 2015, the Company entered into firm sales agreements with entities controlled by the Company's Chairman and Chief Executive Officer, George Economou, to sell its four Suezmax tankers, Vilamoura, Lipari, Petalidi and Bordeira, for an en-bloc sales price of $245 million. In addition, the Company entered into agreements with entities controlled by Mr. Economou to potentially sell its six Aframax tankers, Belmar, Calida, Alicante, Mareta, Saga and Daytona. The agreements to sell the Aframax fleet are not effective until the purchaser confirms his unconditional acceptance latest by June 30, 2015.
Under the terms of the firm sales agreements on the four Suezmax tankers, the purchasers will pay upfront 20% to the Company and the balance purchase price will be due on delivery, which will be between July 1, 2015 and October 31, 2015, at the Company's option.
Under the terms of the agreements on the six Aframax tankers, the purchasers could potentially acquire these tankers for an en-bloc sales price of $291 million, as long as they confirm their unconditional acceptance by June 30, 2015. Other than the sales price, all other material terms and conditions of this potential transaction mirror the terms and conditions on the sale of the four Suezmax tankers, including a 20% upfront payment to the Company.
The above agreements are subject to definitive documentation which the Company expects to complete in April 2015.
As a result of the above transactions, the Company has withdrawn its registration statement on form F-1 with the Securities and Exchange Commission relating to a possible initial public offering of Tankships Investment Holdings Inc.
Capital Expenditure
As of April 6, 2015, we had made pre-delivery payments of $312.0 million in the aggregate for our three seventh generation drillships under construction. The total estimated remaining construction payments for these drillships amounted to approximately $1.8 billion in the aggregate, excluding financing costs, as of April 6, 2015. We plan to finance these costs with cash on hand, operating cash flow, equity financing and additional bank debt.  We have not yet arranged financing for the remaining construction payments relating to the construction of our three seventh generation drillships. We cannot be certain that we will be able to obtain the additional financing we need to complete the acquisition of our seventh generation drillships on acceptable terms or at all.
2



Pledge of Ocean Rig shares
On March 19, 2015 we provided additional security in relation to the ABN AMRO secured bridge credit facility in the form of 12,500,000 Ocean Rig shares owned by us. Cumulatively, the Company has pledged 65,629,069 Ocean Rig shares in relation to that facility.
Maturity of Secured Loan Facility
On March 13, 2015, the $130.0 million secured term loan facility dated March 13, 2008, matured. We are in discussions with the borrower to extend this facility.
Our Drybulk Operations
Management of our Drybulk Vessels
We do not employ personnel to run our vessel operating and chartering business on a day-to-day basis. Prior to January 1, 2011, Cardiff Marine Inc., or Cardiff, a company affiliated with our Chairman, President and Chief Executive Officer, Mr. George Economou, served as our technical and commercial manager pursuant to separate management agreements with each of our drybulk vessel-owning subsidiaries. Effective January 1, 2011, we entered into new management agreements with TMS Bulkers, a related party entity, that replaced our management agreements with Cardiff, on the same terms as our management agreements with Cardiff, as a result of an internal restructuring of Cardiff for the purpose of enhancing Cardiff's efficiency and the quality of its ship-management services.
We believe that TMS Bulkers has established a reputation in the international shipping industry for operating and maintaining a fleet with high standards of performance, reliability and safety.
TMS Bulkers utilizes the same experienced personnel utilized by Cardiff in providing us with comprehensive ship management services, including technical supervision, such as repairs, maintenance and inspections, safety and quality, crewing and training as well as supply provisioning. TMS Bulkers' commercial management services include operations, chartering, sale and purchase, post-fixture administration, accounting, freight invoicing and insurance.
TMS Bulkers' completed implementation of the ISM Code, in 2010. TMS Bulkers has obtained documents of compliance for its office and safety management certificates for our vessels as required by the ISM Code and is ISO 14001 certified in recognition of its commitment to overall quality.
TMS Bulkers is beneficially owned by our Chairman, President and Chief Executive Officer, Mr. George Economou, and, under the guidance of our board of directors, manages our business as a holding company, including our own administrative functions, and we monitor TMS Bulkers' performance under the management agreements.
Chartering of our Drybulk Vessels
We actively manage the deployment of our drybulk fleet between long-term time charters and short-term time charters or spot charters, which generally last from several weeks to several days, and long-term time charters and bareboat charters, which can last up to several years.
As of March 2, 2015, 18 of our drybulk vessels were employed under time charters and 21 of our drybulk vessels were employed in the spot market.
3



Our Tanker Operations
Management of our Tankers
Since January 1, 2011, TMS Tankers, a company controlled by our Chairman, President and Chief Executive Officer, Mr. George Economou, has provided the commercial and technical management functions of our tankers, including while our tankers were under construction, pursuant to separate management agreements entered into with TMS Tankers for each of our tankers.
TMS Tankers is beneficially owned by our Chairman, President and Chief Executive Officer, Mr. George Economou. Mr. Economou, and, under the guidance of our board of directors, manages our business as a holding company, including our own administrative functions, and we monitor TMS Tankers' performance under the management agreements. We believe that TMS Tankers has established a reputation in the international shipping industry for operating and maintaining a fleet with high standards of performance, reliability and safety.
Employment of our Tankers
We operate our tankers in the spot market. As of March 2, 2015, none of our tankers operates in pools. In the past, four of our other Aframax tankers operated in the Sigma tanker pool and three of our Suezmax tankers operated in the Blue Fin tanker pool.
TMS Tankers may seek to hedge our spot exposure through the use of freight forward agreements or other financial instruments. In addition, we may employ our tankers on fixed-rate time charters in the future. Accordingly, we actively monitor macroeconomic trends and governmental rules and regulations that may affect tanker rates in an attempt to optimize the deployment of our fleet .
Our Offshore Drilling Operations
Management of Our Offshore Drilling Operations
Up to October 2013, Ocean Rig's wholly-owned subsidiary, Ocean Rig AS, provided supervisory management services including onshore management, to our operating drilling rigs and drillships pursuant to separate management agreements entered into with each of the drilling unit-owning subsidiaries. In addition, Ocean Rig AS provided supervisory management services for our seventh generation drillships under construction.
From October 2013, the above services are provided by Ocean Rig's wholly owned subsidiary, Ocean Rig Management Inc., pursuant to separate management agreements entered/to be entered with each of the drilling unit-owning subsidiaries.
Under the terms of these management agreements, Ocean Rig Management Inc., through its affiliates, is responsible for, among other things, (i) assisting in construction contract technical negotiations, (ii) securing contracts for the future employment of the drilling units, and (iii) providing commercial, technical and operational management for the drillships.
Effective January 1, 2013, Ocean Rig Management entered into a new services agreement with an affiliate of Cardiff.
Effective from September 1, 2010, DryShips Inc. entered into a consultancy agreement, or the DryShips Consultancy Agreement, with Vivid Finance Ltd., or Vivid Finance, a company controlled by our Chairman, President and Chief Executive Officer, Mr. George Economou, pursuant to which Vivid Finance provides consulting services relating to (i) the identification, sourcing, negotiation and arrangement of new loan and credit facilities, interest swap agreements, foreign currency contracts and forward exchange contracts; (ii) the raising of equity or debt in the public capital markets; and (iii) the renegotiation of existing loan facilities and other debt instruments. Effective January 1, 2013, Ocean Rig Management entered into a separate consultancy agreement, or the Ocean Rig Consultancy Agreement, with Vivid Finance, on the same terms and conditions as the DryShips Consultancy Agreement.
4



Employment of our Drilling Units
The Leiv Eiriksson commenced a drilling contract in April 2013   with a consortium coordinated by Rig Management Norway, or Rig Management, for the drilling of 15 wells on the Norwegian Continental Shelf at a maximum dayrate of $545,000.  We received approximately $83.0 million under the contract to cover mobilization and fuel costs as well as the cost of equipment upgrades to operate in the Norwegian Continental Shelf. The contract has a minimum duration of 1,070 days and includes three options of up to six wells each that must be exercised prior to the expiration of the firm contract period in the first quarter of 2016.
The Eirik Raude is currently undergoing the acceptance testing and it is expected to commence a six well drilling contract for drilling offshore Falkland Islands with Premier Oil Exploration and Production Ltd, or Premier, with a duration of approximately 260 days at a maximum dayrate of $561,350 under the initial term of the contract, plus a mobilization fee of $18.0 million. Under the contract, Premier has two options to extend the term of the contract by eight additional wells each.
The Ocean Rig Corcovado is currently employed under a three-year drilling contract, plus a mobilization period with Petroleo Brasileiro S.A., or Petrobras Brazil, for drilling operations offshore Brazil at a maximum dayrate of $439,402 (including service fees of $67,722 per day, based on the contracted rate in Real per day and the February 24, 2015 exchange rate of R$2.87:USD $1.00), plus a mobilization fee of $30.0 million. The contract has been extended for 1,095 at an average dayrate of $523,306, plus reimbursement by Petrobras for contract related equipment upgrades of $30.0 million.
The Ocean Rig Olympia commenced a three-year drilling contract with Total E&P Angola in July 2012 for drilling operations offshore West Africa at a maximum dayrate of $585,437, plus mobilization and demobilization fees of $9.0 million and $3.5 million, respectively, plus the cost of fuel. Total E&P Angola has redelivered the Ocean Rig Olympia on completion of its well on March 9, 2015 and ahead of the contractual redelivery date of August 2015. We are presently in discussions with Total EP Angola and intend to legally defend our rights should we fail to reach an amicable solution. The Ocean Rig Olympia will be employed under the ENI contracts for drilling operations offshore Angola in November 2015 with an estimated backlog of approximately $21.7 million .
The Ocean Rig Poseidon commenced a three-year drilling contract with ENI Angola S.p.A., or ENI, in May 2013 for drilling operations offshore Angola at a maximum dayrate of $690,300, which is the average maximum dayrate applicable during the initial three-year term of the contract.  During the term of the contract, the initial maximum dayrate of $670,000 will increase annually at a rate of 3%, beginning twelve months after the commencement date.  The contract also includes a mobilization rate of $656,600 per day, plus reimbursement for the cost of fuel, and a demobilization fee of $5.0 million.  In January 2015, ENI has exercised its option to extend the contract for the drillship Ocean Rig Poseidon for a further one year until the second quarter of 2017 with an adjusted dayrate in exchange of the ENI contracts. The new average maximum dayrate, under the extension, will be $539,750.
The Ocean Rig Mykonos commenced a three-year drilling contract, plus a mobilization period, with Petrobras Brazil, on September 30, 2011, for drilling operations offshore Brazil at a maximum dayrate of $433,044 (including service fees of $ 65,404 per day, based on the contracted rate in Real and the February 24, 2015 exchange rate of R$2.87: $1.00), plus a mobilization fee of $30.0 million. The contract has been extended for 1,095 at an average dayrate of $514,090, plus reimbursement by Petrobras for contract related equipment upgrades of $30.0 million.
The Ocean Rig Mylos commenced a three-year drilling contract with Repsol for drilling operations offshore Brazil in August 2013 at a maximum dayrate of $ 637,270, which is the average maximum dayrate applicable during the initial three-year term of the contract, plus a mobilization fee of $40.0 million. Under the contract, Repsol has options to extend the contract for one year beyond the initial three-year contract period.
5



The Ocean Rig Skyros, which is currently idle,   will be employed under the ENI contracts for drilling operations offshore Nigeria and Angola in April 2015 with an estimated backlog of approximately $68.6 million. In November 2015, the Ocean Rig Skyros will commence its six year contract with Total for drilling operations offshore Angola. Under the contract, we are entitled to a maximum dayrate of approximately $592,834, which is the average maximum dayrate applicable during the initial six-year term of the contract, plus mobilization fees of $20 million. Under the contract, the initial maximum dayrate is subject to a fixed annual escalation of 2% during the contract period.
The Ocean Rig Athena commenced a three-year drilling contract with ConocoPhillips for drilling operations offshore Angola in March 2014 at a maximum dayrate of $662,523, which is the average maximum dayrate applicable during the initial three-year term of the contract, plus a lump-sum mobilization fee of $35.2 million, exclusive of fuel costs. Under the contract, the initial maximum dayrate is subject to a fixed annual escalation of approximately 2% during the contract period. In addition, ConocoPhillips has the option to extend the duration of the contract for two years.
The Ocean Rig Apollo commenced a three-year contract with Total E&P Congo for drilling operations offshore West Africa in March 2015 with an estimated backlog of approximately $692.6 million, including mobilization. In addition, Total has the option to extend the term of the contract for four periods of six months each, with the first option exercisable not less than one year before completion date.
The total contracted backlog under our drilling contracts for our drilling units, including our drilling rigs, as of February 24, 2015, was $5.2 billion. We calculate our contract backlog by multiplying the contractual dayrate under all of our employment contracts for which we have firm commitments as of February 24, 2015, by the minimum expected number of days committed under such contracts (excluding any options to extend), assuming full utilization. There can be no assurance that the counterparties to such contracts will fulfill their obligations under the contracts.  See "Risk Factors—Company Specific Risk Factors—Our future contracted revenue for our fleet of drilling units may not be ultimately realized."
Unless otherwise stated, all references to maximum dayrates included in this prospectus are exclusive of any applicable annual contract revenue adjustments, which generally result in the escalation of the dayrates payable under the drilling contracts.
Newbuilding Drillships
We have entered into contracts for the construction of three seventh generation drillships, two of which are new integrated design drillships and all are equipped with two blow-out preventers, scheduled for delivery in June 2016, February 2017 and June 2017, respectively, in connection with which we had made total payments of $280.2 million to Samsung Heavy Industries Co. Ltd., or Samsung, as of December 31, 2014. The estimated total project cost for these drillships is approximately $2.1 billion.
6



Our Fleet
Set forth below is summary information concerning our fleet as of March 5, 2015.
Drybulk Vessels
 
 
 
 
 
 
 
 
 
 
 
 
Redelivery
Capesize:
Year
Built
 
 
DWT
 
Type
 
Current
employment
or
employment
upon delivery
 
Gross rate
per day
 
Earliest
 
Latest
Rangiroa
2013
 
 
206,026
 
Capesize
 
T/C (1)
 
 
$23,000
 
May-18
 
Dec-23
Negonego
2013
 
 
206,097
 
Capesize
 
T/C (1)
 
 
$21,500
 
Mar-20
 
Feb-28
Fakarava
2012
 
 
206,152
 
Capesize
 
T/C
 
 
$25,000
 
Sept-15
 
Sept-20
Raiatea
2011
 
 
179,078
 
Capesize
 
T/C (1)
 
 
$23,500
 
Oct-19
 
Dec-19
Mystic
2008
 
 
170,040
 
Capesize
 
T/C
 
 
$52,310
 
Aug-18
 
Dec-18
Robusto
2006
 
 
173,949
 
Capesize
 
T/C (1)
 
 
$23,500
 
Jul-19
 
Sep-19
Cohiba
2006
 
 
174,234
 
Capesize
 
T/C (1)
 
 
$23,500
 
Sep-19
 
Nov-19
Montecristo
2005
 
 
180,263
 
Capesize
 
T/C (1)
 
 
$23,500
 
Jul-19
 
Sep-19
Flecha
2004
 
 
170,012
 
Capesize
 
T/C
 
 
$55,000
 
Jul-18
 
Nov-18
Manasota
2004
 
 
171,061
 
Capesize
 
T/C
 
 
$30,000
 
Jan-18
 
Aug-18
Partagas
2004
 
 
173,880
 
Capesize
 
T/C (1)
 
 
$23,500
 
Sep-19
 
Nov-19
Alameda
2001
 
 
170,662
 
Capesize
 
T/C
 
 
$27,500
 
Nov-15
 
Jan-16
Capri
2001
 
 
172,579
 
Capesize
 
T/C
 
 
$20,000
 
Jan-16
 
May-16
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average age based on year built/ Sum of DWT/ Total number of vessels
7.6 years
 
 
2,354,033
 
13
 
 
 
 
 
 
 
 
 

7



 
 
 
 
 
 
 
 
 
 
 
 
 
Redelivery
Panamax:
Year
Built
 
 
DWT
 
Type
 
Current
employment
or
employment
upon delivery
 
 
Gross rate
per day
 
Earliest
 
Latest
Raraka
2012
 
 
76,037
 
Panamax
 
Spot
 
 
Spot
 
N/A
 
N/A
Woolloomooloo
2012
 
 
76,064
 
Panamax
 
Spot
 
 
Spot
 
N/A
 
N/A
Amalfi
2009
 
 
75,206
 
Panamax
 
Spot
 
 
Spot
 
N/A
 
N/A
Rapallo
2009
 
 
75,123
 
Panamax
 
T/C Index  linked
 
 
T/C Index linked
 
Jul-16
 
Sep-16
Catalina
2005
 
 
74,432
 
Panamax
 
Spot
 
 
Spot
 
N/A
 
N/A
Majorca
2005
 
 
74,477
 
Panamax
 
Spot
 
 
Spot
 
N/A
 
N/A
Ligari
2004
 
 
75,583
 
Panamax
 
Spot
 
 
Spot
 
N/A
 
N/A
Saldanha
2004
 
 
75,707
 
Panamax
 
Spot
 
 
Spot
 
N/A
 
N/A
Sorrento
2004
 
 
76,633
 
Panamax
 
T/C
 
 
$24,500
 
Aug-21
 
Dec-21
Mendocino
2002
 
 
76,623
 
Panamax
 
T/C Index  linked
 
 
T/C Index linked
 
Sep-16
 
Nov-16
Bargara
2002
 
 
74,832
 
Panamax
 
T/C Index  linked
 
 
T/C Index linked
 
Sep-16
 
Nov-16
Oregon
2002
 
 
74,204
 
Panamax
 
Spot
 
 
Spot
 
N/A
 
N/A
Ecola
2001
 
 
73,931
 
Panamax
 
Spot
 
 
Spot
 
N/A
 
N/A
Samatan
2001
 
 
74,823
 
Panamax
 
Spot
 
 
Spot
 
N/A
 
N/A
Sonoma
2001
 
 
74,786
 
Panamax
 
Spot
 
 
Spot
 
N/A
 
N/A
Capitola
2001
 
 
74,816
 
Panamax
 
Spot
 
 
Spot
 
N/A
 
N/A
Levanto
2001
 
 
73,925
 
Panamax
 
T/C Index  linked
 
 
T/C Index linked
 
Aug-16
 
Oct-16
Maganari
2001
 
 
75,941
 
Panamax
 
Spot
 
 
Spot
 
N/A
 
N/A
Coronado
2000
 
 
75,706
 
Panamax
 
Spot
 
 
Spot
 
N/A
 
N/A
Marbella
2000
 
 
72,561
 
Panamax
 
Spot
 
 
Spot
 
N/A
 
N/A
Redondo
2000
 
 
74,716
 
Panamax
 
Spot
 
 
Spot
 
N/A
 
N/A
Topeka
2000
 
 
74,716
 
Panamax
 
Spot
 
 
Spot
 
N/A
 
N/A
Ocean Crystal
1999
 
 
73,688
 
Panamax
 
Spot
 
 
Spot
 
N/A
 
N/A
Helena
1999
 
 
73,744
 
Panamax
 
Spot
 
 
Spot
 
N/A
 
N/A
Average age based on year built / Sum of DWT/ Total number of vessels
11.7 years
 
 
1,798,274
 
24
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Supramax:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Byron
2003
 
 
51,118
 
Supramax
 
Spot
 
 
Spot
 
N/A
 
N/A
Galveston
2002
 
 
51,201
 
Supramax
 
Spot
 
 
Spot
 
N/A
 
N/A
Average age based on year built / Sum of DWT/ Total number of vessels
12.5 years
 
 
102,319
 
2
 
 
 
 
 
 
 
 
 
Totals (38)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average age based on year built / Sum of DWT/ Total number of vessels
9.5 years
 
 
4,254,626
 
39
 
 
 
 
 
 
 
 
 

(1) Time charter includes purchase options for the charterer, see also "Risk Factors—Company Specific Risk Factors—The failure of our counterparties to meet their obligations under our time charter agreements, or their exercise of a purchase option under certain of those agreements, could cause us to suffer losses or otherwise adversely affect our business."
8



Drilling Units
Drilling Unit
Year Built or
Scheduled
Delivery/
Generation
Water
Depth to the
Wellhead (ft)
Drilling
Depth to the
Oil Field (ft)
Customer
Expected Contract
Term(1)
 
Average
Maximum
Dayrate
Drilling
Location
 
Operating Drilling Rigs
 
 
 
 
 
 
 
 
Leiv Eiriksson
2001/5th
10,000
30,000
Rig Management Norway AS(2)
Q2 2013–Q1 2016
$545,000
 
Norwegian Continental Shelf
Eirik Raude
2002/5th
10,000
30,000
Premier Oil Exploration and
Production Ltd.(3)
Q1 2015 – Q4 2015
$561,350
 
Falkland Islands
Operating Drillships
 
 
 
 
 
 
 
 
Ocean Rig Corcovado
2011/6th
10,000
40,000
Petroleo Brasileiro S.A.
Q2 2012–Q2 2015
$ 439,402
(4)
Brazil
 
 
 
 
Petroleo Brasileiro S.A.
Q2 2015–Q2 2018
$523,306
(5)
Brazil
Ocean Rig Olympia
2011/6th
10,000
40,000
Total E&P Angola
Q3 2012–Q3 2015(6)
$585,437
 
Angola
 
 
 
 
ENI Angola S.p.A.(7)
Q4 2015-Q4 2015
$355,000
 
Angola
Ocean Rig Poseidon
2011/6th
10,000
40,000
ENI Angola S.p.A.
Q2 2013–Q2 2016
$690,300
(8)
Angola
 
 
 
 
ENI Angola S.p.A.(10)
Q2 2016-Q2 2017
$539,150
 
Angola
Ocean Rig Mykonos
2011/6th
10,000
40,000
Petroleo Brasileiro S.A.
Q1 2012–Q1 2015
$ 433,044
(4)
Brazil
 
 
 
 
Petroleo Brasileiro S.A.
Q1 2015–Q1 2018
$514,090
(5)
Brazil
Ocean Rig Mylos
2013/7th
12,000
40,000
Repsol Sinopec Brasil S.A.
Q3 2013–Q3 2016
$637,270
(9)
Brazil
Ocean Rig Skyros
2013/7th
12,000
40,000
ENI Angola S.p.A.(7)
Q2 2015-Q3 2015
$355,000
 
Nigeria, Angola
 
 
 
 
Total E&P Angola
Q4 2015-Q3 2021
$592,834
 
Angola
Ocean Rig Athena
2014/7th
12,000
40,000
ConocoPhillips Angola 36 & 37 Ltd
Q1 2014–Q2 2017
$662,523
(10)
Angola
Ocean Rig Apollo
Q1 2015/7th
12,000
40,000
Total E&P Congo
Q1 2015-Q2 2018
$594,646
(11)
West Africa
 
Newbuilding Drillships
 
 
 
 
 
 
 
 
Ocean Rig Santorini
Q2 2016/7th
12,000
40,000
 
 
 
 
 
Ocean Rig TBN#1
Q1 2017/7th
12,000
40,000
 
 
 
 
 
Ocean Rig TBN#2
Q2 2017/7th
12,000
40,000
 
 
 
 
 

 (1)            Not including the exercise of any applicable options to extend the term of the contract.
9



(2)            Rig Management Norway is the coordinator for the consortium under the contract. The contract has a minimum duration of 1,070 days and includes three options of up to six wells each that must be exercised prior to the expiration of the firm contract period in the first quarter of 2016.
(3)            The contract has a minimum duration of 260 days and includes two options of up to eight wells each, the first of which must be exercised prior to the commencement of the contract and the other one must be exercised before the expiration of the firm and option contract period.
(4)            Approximately 20% of the maximum dayrates are service fees paid to us in Brazilian Real (R$). The maximum dayrate disclosed in this table is based on the February 24, 2015 exchange rate of R$2.87:$1.00.
(5)            We have been awarded extensions of the drilling contracts for the Ocean Rig Corcovado and the Ocean Rig Mykonos by Petrobras for drilling offshore Brazil. The term of each extension is for 1,095 excluding reimbursement by Petrobras for contract related equipment upgrades. The new contract for the Ocean Rig Mykonos commenced in March 2015, while for the Ocean Rig Corcovado the new contract will commence in direct continuation from the end of the current agreement with Petrobras, in the second quarter of 2015.
(6)            Total E&P Angola has redelivered the Ocean Rig Olympia on completion of its well on March 9, 2015 and ahead of the contractual redelivery date of August 2015. We are presently in discussions with Total EP Angola and intend to legally defend our rights should we fail to reach an amicable solution.
(7)            On January 8, 2015, we, entered into an Omnibus Agreement with ENI Angola S.p.A, or ENI, pursuant to which ENI has exercised its option to extend the contract for the drillship Ocean Rig Poseidon for a further one year until the second quarter of 2017. As part of the contract extension for the Ocean Rig Poseidon, Ocean Rig has agreed to adjust the existing dayrate of the Ocean Rig Poseidon contract in exchange for ENI agreeing to enter into two contracts, or the ENI contracts, for the employment of one or more of Ocean Rig's available drillships in West Africa starting in the second quarter of 2015 for an aggregate period of approximately 8 months. The Agreement outlined above remains subject to customary closing conditions including the approval by national authorities which we expect will be obtained during the second quarter of 2015.
(8)            The maximum dayrate of $690,300 is the average maximum dayrate applicable during the initial three-year term of the contract. Under the contract, the initial maximum dayrate of $670,000 will increase annually at a rate of 3%, beginning twelve months after the commencement date, during the term of the contract. ENI has the option to extend the term of the contract by two optional periods of one-year each.
(9)            On November 4, 2013 the Ocean Rig Mylos commenced drilling operations with Repsol at an average maximum dayrate of approximately $637,270 over the initial term of the contract. Under the contract, Repsol has options to extend the contract for up to two years beyond the initial three-year contract period.
(10)            On June 7, 2014, the Ocean Rig Athena commenced drilling operations with ConocoPhillips at an average maximum dayrate of $662,523 which is the average maximum dayrate applicable during the initial three-year term of the contract. Under the contract, the initial maximum dayrate is subject to a fixed annual escalation of approximately 6% during the contract period. Under the contract, ConocoPhillips has the option to extend the initial contract period by up to two years.
(11)            The maximum dayrate of approximately $594,646 is the average maximum dayrate applicable during the initial three-year term of the contract. Under the contract, the initial maximum dayrate of $580,000 is subject to a fixed escalation of 2% during the contract period. Under the contract, the counterparty has the option to extend the initial contract period by up to two years.
10



Tankers
 
 
 
 
 
 
Redelivery
 
 
Year
Built
DWT
Type
Current employment
or employment
upon delivery
Gross
rate
per day
Earliest
 
Latest
 
Suezmax :
 
 
 
 
 
 
 
 
 
Bordeira
2013
158,513
Suezmax
Spot
N/A
N/A
 
N/A
 
Petalidi
2012
158,532
Suezmax
Spot
N/A
N/A
 
N/A
 
Lipari
2012
158,425
Suezmax
Spot
N/A
N/A
 
N/A
 
Vilamoura
2011
158,622
Suezmax
Spot
N/A
N/A
 
N/A
 
Aframax :
 
 
 
 
 
 
 
 
 
Alicante
2013
115,708
Aframax
Spot
N/A
N/A
 
N/A
 
Mareta
2013
115,796
Aframax
Spot
N/A
N/A
 
N/A
 
Calida
2012
115,812
Aframax
Spot
N/A
N/A
 
N/A
 
Saga
2011
115,738
Aframax
Spot
N/A
N/A
 
N/A
 
Daytona
2011
115,896
Aframax
Spot
N/A
N/A
 
N/A
 
Belmar
2011
115,904
Aframax
Spot
N/A
N/A
 
N/A
 

Corporate Structure
DryShips Inc. is a corporation organized under the laws of the Republic of the Marshall Islands. We maintain our principal executive offices at 109 Kifisias Avenue and Sina Street, 151 24, Marousi, Athens, Greece. Our telephone number at that address is + 011 30 210 80 90 570. Our website address is www.dryships.com. The information on our website is not a part of this prospectus.
11




RISK FACTORS

An investment in our securities involves a high degree of risk. You should consider carefully the risks set forth below and in any documents we have incorporated by reference, as well as those under the heading "Risk Factors" in any prospectus supplement, before investing in the securities offered by this prospectus.  You should also carefully consider the risks described in any future reports that summarize the risks that may materially affect our business, before making an investment in our securities. Please see the section of this prospectus entitled "Where You Can Find Additional Information—Information Incorporated by Reference."
Some of the following risks relate principally to the industries in which we operate and our business in general. Other risks relate principally to the securities market and ownership of our common shares. The occurrence of any of the events described in this section could significantly and negatively affect our business, financial condition, operating results, cash flows or our ability to pay dividends, if any, in the future, or the trading price of our common shares.
Risk Factors Relating to the Drybulk Shipping Industry
Charterhire rates for drybulk carriers are volatile and remain significantly below their high in 2008, which has had and may continue to have an adverse effect on our revenues, earnings and profitability and our ability to comply with our loan covenants.
The degree of charterhire rate volatility among different types of drybulk vessels has varied widely; however, the prolonged downturn in the drybulk charter market has severely affected the entire drybulk shipping industry and charterhire rates for drybulk vessels have declined significantly from historically high levels. The Baltic Dry Index, or the BDI, an index published daily by the Baltic Exchange Limited, a London-based membership organization that provides daily shipping market information to the global investing community, is a daily average of charter rates for key drybulk routes, which has long been viewed as the main benchmark to monitor the movements of the drybulk vessel charter market and the performance of the overall drybulk shipping market. The BDI declined 94% in 2008 from a peak of 11,793 in May 2008 to a low of 663 in December 2008 and has remained volatile since then.  The BDI recorded an all time low of 516 on February 17, 2015 and there can be no assurance that the drybulk charter market will increase, and the market could decline further.
The decline and volatility in charter rates has been due to various factors, including the over-supply of drybulk vessels, the lack of trade financing for purchases of commodities carried by sea, which resulted in a significant decline in cargo shipments. The decline and volatility in charter rates in the drybulk market also affects the value of our drybulk vessels, which follows the trends of drybulk charter rates, and earnings on our charters, and similarly, affects our cash flows, liquidity and compliance with the covenants contained in our loan agreements.  If low charter rates in the drybulk market continue or decline further for any significant period, this could have an adverse effect on our vessel values and our ability to continue as a going concern and comply with the financial covenants in our loan agreements. In such a situation, unless our lenders were willing to provide waivers of covenant compliance or modifications to our covenants, our lenders could accelerate our debt and we could face the loss of our vessels. In addition, the decline in the drybulk carrier charter market has had and may continue to have additional adverse consequences for the drybulk shipping industry, including an absence of financing for vessels, no active secondhand market for the sale of vessels, charterers seeking to renegotiate the rates for existing time charters, and widespread loan covenant defaults in the drybulk shipping industry. Accordingly, the value of our common shares could be substantially reduced or eliminated.
Because we currently employ 21 of our vessels in the spot market and pursuant to short-term time charters, we are exposed to changes in spot market and short-term charter rates for drybulk carriers and such changes may affect our earnings and the value of our drybulk carriers at any given time. In addition, we have two vessels scheduled to come off of their current charters in 2015 for which we will be seeking new employment. We may not be able to successfully charter our vessels in the future or renew existing charters at rates sufficient to allow us to meet our obligations. Fluctuations in charter rates result from changes in the supply of and demand for vessel capacity and changes in the supply and demand for the major commodities carried by water internationally. Because the factors affecting the supply of and demand for vessels are outside of our control and are unpredictable, the nature, timing, direction and degree of changes in industry conditions are also unpredictable.
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Factors that influence demand for vessel capacity include:
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supply and demand for energy resources, commodities, semi-finished and finished consumer and industrial products;
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changes in the exploration or production of energy resources, commodities, semi-finished and finished consumer and industrial products;
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the location of regional and global exploration, production and manufacturing facilities;
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the location of consuming regions for energy resources, commodities, semi-finished and finished consumer and industrial products;
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the globalization of production and manufacturing;
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global and regional economic and political conditions, including armed conflicts, terrorist activities, embargoes and strikes;
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natural disasters and other disruptions in international trade;
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developments in international trade;
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changes in seaborne and other transportation patterns, including the distance cargo is transported by sea;
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environmental and other regulatory developments;
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currency exchange rates; and
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weather.
The factors that influence the supply of vessel capacity include:
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the number of newbuilding deliveries;
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port and canal congestion;
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the scrapping rate of older vessels;
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vessel casualties; and
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the number of vessels that are out of service.
In addition to the prevailing and anticipated freight rates, factors that affect the rate of newbuilding, scrapping and laying-up include newbuilding prices, secondhand vessel values in relation to scrap prices, costs of bunkers and other operating costs, costs associated with classification society surveys, normal maintenance and insurance coverage, the efficiency and age profile of the existing drybulk fleet in the market and government and industry regulation of maritime transportation practices, particularly environmental protection laws and regulations. These factors influencing the supply of and demand for shipping capacity are outside of our control, and we may not be able to correctly assess the nature, timing and degree of changes in industry conditions.
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We anticipate that the future demand for our drybulk carriers will be dependent upon continued economic growth in the world's economies, including China and India, seasonal and regional changes in demand, changes in the capacity of the global drybulk carrier fleet and the sources and supply of drybulk cargoes to be transported by sea. Given the large number of new drybulk carriers currently on order with shipyards, the capacity of the global drybulk carrier fleet seems likely to increase and economic growth may not continue. Adverse economic, political, social or other developments could have a material adverse effect on our business and operating results.
An over-supply of drybulk carrier capacity may prolong or further depress the current low charter rates and, in turn, adversely affect our profitability.
The market supply of drybulk carriers has been increasing as a result of the delivery of numerous newbuilding orders over the last few years. Newbuildings have been delivered in significant numbers since the beginning of 2006 and, as of January 1, 2015, newbuilding orders had been placed for an aggregate of more than 22% of the existing global drybulk fleet, with deliveries expected during the next three years. Due to lack of financing many analysts expect significant cancellations and/or slippage of newbuilding orders. While vessel supply will continue to be affected by the delivery of new vessels and the removal of vessels from the global fleet, either through scrapping or accidental losses, an over-supply of dry bulk carrier capacity could exacerbate the recent decrease in charter rates or prolong the period during which low charter rates prevail. Currently, some of our spot market-related time charterers are at times unprofitable due the volatility associated with dry cargo freight rates. If market conditions persist or worsen, upon the expiration or termination of our vessels' current non-spot charters, we may only be able to re-charter our vessels at reduced or unprofitable rates, or we may not be able to charter these vessels at all. The occurrence of these events could have a material adverse effect on our business, results of operations, cash flows, financial condition and ability to pay dividends. Currently, two of the charters for our drybulk vessels are scheduled to expire in 2015.
The market values of our vessels may decrease, which could limit the amount of funds that we can borrow or cause us to breach certain covenants in our credit facilities and we may incur a loss if we sell vessels following a decline in their market value.
The fair market values of our vessels are related to prevailing freight charter rates. However, while the fair market values of vessels and the freight charter market have a very close relationship as the charter market moves from trough to peak, the time lag between the effect of charter rates on market values of ships can vary.
The fair market values of our vessels have generally experienced high volatility, and you should expect the market values of our vessels to fluctuate depending on a number of factors including:
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prevailing level of charter rates;
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general economic and market conditions affecting the shipping industry;