PSHG Performance Shipping Inc

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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SCHEDULE 14D-9

SOLICITATION/RECOMMENDATION STATEMENT

UNDER SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934

(Amendment No. 2)

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PERFORMANCE SHIPPING INC.

(Name of Subject Company)

PERFORMANCE SHIPPING INC.

(Names of Persons Filing Statement)

COMMON SHARES, PAR VALUE $0.01 PER SHARE

(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)

(Title of Class of Securities)

Y67305154

(CUSIP Number of Class of Securities)

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(Name, address and telephone number of person authorized

to receive notices and communications on behalf of the persons filing statement)

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with copies to:

Will Vogel

Watson Farley & Williams LLP

250 West 55th Street, 31st Floor

New York, New York 10019

+1-212-922-2200

Robert B. Greco

Richards, Layton & Finger, P.A.

One Rodney Square

920 North King Street

Wilmington, Delaware 19801

+1-302-651-7728

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☐ Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

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PURPOSE OF THE AMENDMENT

This Amendment No. 2 (the “Schedule 14D-9 Amendment No. 2”) amends and restates the Schedule 14D-9 filed by Performance Shipping Inc., a corporation incorporated under the laws of the Republic of the Marshall Islands (the “Company”), with the U.S. Securities and Exchange Commission (the “SEC”) on October 25, 2023, as amended by Amendment No. 1 thereto filed by the Company with the SEC on November 6, 2023, with respect to the Offer (as defined below). This Schedule 14D-9 Amendment No. 2 is being filed by the Company with the SEC to disclose certain updates as reflected below.

INTRODUCTION

This Solicitation/Recommendation Statement on Schedule 14D-9, as amended by Amendment No. 1 thereto filed by Performance Shipping Inc., a corporation incorporated under the laws of the Republic of the Marshall Islands (the “Company”), with the Securities and Exchange Commission (the “SEC”) on November 6, 2023 and Amendment No. 2 thereto filed by the Company with the SEC on November 14, 2023 (this “Schedule 14D-9”), relates to a cash tender offer (the “Offer”) by Sphinx Investment Corp., a corporation incorporated under the laws of the Republic of the Marshall Islands (the “Offeror”), to purchase from the shareholders of the Company all outstanding shares of the Company’s common shares, par value $0.01 per share (the “Common Shares”), and the associated preferred stock purchase rights (the “Rights” and, together with the Common Shares, the “Shares”) issued pursuant to the Stockholders’ Rights Agreement, dated December 20, 2021, between the Company and Computershare Inc., as rights agent (the “Rights Agreement”), at a price of $3.00 per Share (without interest and less any applicable withholding taxes) (the “Offer Price”), upon the terms and subject to the conditions set forth in the Amended and Restated Offer to Purchase, dated October 30, 2023 (the “Offer to Purchase”), the related revised Notice of Guaranteed Delivery (the “Notice of Guaranteed Delivery”), and the revised related Letter of Transmittal (the “Letter of Transmittal”), as set forth in the Offeror’s Tender Offer Statement on Schedule TO (which is also Amendment No. 4 to the Schedule 13D filed by the Offeror, Maryport Navigation Corp. and Mr. George Economou on August 25, 2023 (and amended on August 31, 2023, September 4, 2023, September 15, 2023 and twice on October 11, 2023)) filed with the SEC on October 11, 2023 (the “Original Schedule TO”), as amended by Amendment No. 1 and Amendment No. 2 thereto filed by the Offeror with the SEC on October 30, 2023 (together with the Original Schedule TO, the “Schedule TO”). Unless the Offer is extended by the Offeror, the Offer and withdrawal rights thereunder will expire at 11:59 p.m., New York City Time, on November 15, 2023.

AS DISCUSSED BELOW, THE SPECIAL COMMITTEE OF THE COMPANY’S BOARD OF DIRECTORS (the “BOARD”) UNANIMOUSLY RECOMMENDS ON BEHALF OF THE COMPANY THAT THE COMPANY’S SHAREHOLDERS REJECT THE OFFER AND NOT TENDER THEIR COMMON SHARES FOR PURCHASE PURSUANT TO THE OFFER.

TABLE OF CONTENTS

Name and Address

The Company’s name and the address and telephone number of its principal executive office is as follows:

Performance Shipping Inc.

373 Syngrou Avenue

175 64 Palaio Faliro

Athens, Greece

+30-216-600-2400

Securities

This Schedule 14D-9 relates to the Company’s Shares (which include the Common Shares and the Rights). As of November 10, 2023, the Company had 12,152,559 Common Shares outstanding.

Name and address

The Company is the person filing this Schedule 14D-9. The Company’s name and the address and telephone number of its principal executive office are set forth in Item 1 above, which information is incorporated herein by reference.

Tender Offer

This Schedule 14D-9 relates to the Offer, pursuant to which the Offeror has offered to purchase all of the Company’s outstanding Common Shares and associated Rights, at a price of $3.00 per Share in cash (without interest and less any applicable withholding taxes), upon the terms and subject to the conditions set forth in the Offeror’s Offer to Purchase, the related Notice of Guaranteed Delivery and the related Letter of Transmittal, as set forth in the Offeror’s Schedule TO. According to the Offer to Purchase, unless the Offer is extended by the Offeror, the Offer and withdrawal rights thereunder will expire at 11:59 p.m., New York City Time, on November 15, 2023 (the “Expiration Date and Time”).

(i)

there shall have been validly tendered into the Offer and not withdrawn a number of Shares which, together with any Shares then-owned by the Offeror, represents at least a majority of the issued and outstanding Shares on a fully-diluted basis (assuming the exercise or conversion of all then-outstanding Options (as defined below) and other derivative securities regardless of the exercise or conversion price, the vesting schedule or other terms and conditions thereof);

(ii)

either (a) the Rights Agreement shall have been validly terminated and the Rights shall have been redeemed, and the Certificate of Designation, Preferences and Rights of Series A Participating Preferred Stock (such certificate, the “Series A Certificate” and such stock, the “Series A Preferred Stock”) shall have been validly cancelled and no Series A Preferred Stock shall be outstanding, or (b) the Rights Agreement shall have been otherwise made inapplicable to the Offer and the Offeror and its affiliates;

(iii)

the Board shall have validly waived the applicability of Article K of the Company’s Amended and Restated Articles of Incorporation (the “Articles of Incorporation” and such Article K, “Article K”) to the purchase of the Shares by the Offeror in the Offer so that the provisions of Article K would not, at or at any time following consummation of the Offer, prohibit, restrict or apply to any “business combination”, as defined in Article K, involving the Company and the Offeror or any affiliate or associate of the Offeror;

(iv)

the Company shall not have any securities outstanding, authorized or proposed for issuance other than (a) the Shares, (b) authorized Series A Preferred Stock (none of which shall have been issued), (c) the number of shares of Series B Convertible Cumulative Perpetual Preferred Stock (the “Series B Preferred Stock”) outstanding as of October 10, 2023, (d) the warrants outstanding as of October 10, 2023 (which shall not be exercisable in the aggregate for more than the 7,904,221 Shares disclosed by the Company in its Form 6-K on September 29, 2023, and the terms of which such warrants shall not have been amended on or after October 11, 2023), (e) (1) the options to purchase Shares under the Company’s Amended and Restated 2015 Equity Incentive Plan (as such plan was in effect as of October 10, 2023) (the “Equity Incentive Plan”) outstanding, and subject to the terms as in effect, as of October 10, 2023, and (2) any options to purchase shares under the Equity Incentive Plan that are issued pursuant to the Equity Incentive Plan on or after October 11, 2023 in the ordinary and usual course of business, consistent with past practice (clause (e)(1) and clause (e)(2), collectively, the “Options”); (f) Shares authorized for issuance but not yet subject to awards under the Equity Incentive Plan (none of which shall, on or after October 11, 2023, have been issued other than in the ordinary and usual course of business, consistent with past practice); and (g) the Remedial Rights (as defined below) and the Remedial Shares (as defined below) (with none of the Remedial Shares having been issued) (the “Equity Condition”);

(v)

either (a) (1) Section 4 of the Certificate of Designation, Preferences and Rights of Series C Convertible Cumulative Redeemable Perpetual Preferred Stock (such certificate, the “Series C Certificate” and such stock, the “Series C Preferred Stock”) shall no longer be in effect, (2) any and all shares of the Series C Preferred Stock held as of October 11, 2023 by any of Mango Shipping Corp., Mitzela Corp. and Giannakis (John) Evangelou, Antonios Karavias, Christos Glavanis, and Reidar Brekke, or by any “affiliate” (as such term is defined in Rule 12b-2 of the General Rules and Regulations under the United States Securities and Exchange Act of 1934, as amended (the “Exchange Act”) of any of the foregoing (collectively, the “Insider Holders”), and any and all Shares purported to have been issued pursuant to the purported conversion of any such shares of Series C Preferred Stock, shall have been validly cancelled for no consideration and (3) no other shares of Series C Preferred Stock shall be outstanding; or (b) (1) there shall have been issued upon each Share outstanding from time to time an uncertificated right (which such right shall be stapled to the associated Share and shall, immediately and solely following the Offeror’s deposit with Continental Stock Transfer & Trust Company as tender offer agent (the “Tender Offer Agent”) of the proceeds required to consummate the Offer, be freely exercisable at any time in exchange for nominal consideration (and shall not be exercisable prior to the Offeror’s deposit with the Tender Offer Agent of the proceeds required to consummate the Offer, and shall not be subject to involuntary redemption or repurchase)) (each, a “Remedial Right”) to purchase such number of shares of Series C Preferred Stock (and/or such number of shares of a new class of preferred stock of the Company) (the “Remedial Shares”) that would, once issued to the holder of such Share, put the holder of such Share in the same economic, voting, governance and other position as the holder of such Share would have been in had the Series C Preferred Stock issued to the Insider Holders been cancelled for no consideration, (2) no Remedial Shares (or rights to acquire Remedial Shares other than the Remedial Rights) shall have been issued to any Insider Holder or any “associate” (as such term is defined in Rule 12b-2 of the General Rules and Regulations under the Exchange Act) of an Insider Holder and (3) any Remedial Right beneficially owned from time to time by any Insider Holder, any “associate” (as such term is defined in Rule 12b-2 of the General Rules and Regulations under the Exchange Act) of an Insider Holder or any direct or indirect transferee of an Insider Holder or of any such “associate” shall be rendered unexercisable pursuant to the definitive documentation for such Remedial Rights (the applicable of clause (a) and clause (b) referred to as the “Series C Condition”);

(vi)	the Certificate of Designation, Preferences and Rights of Series B Preferred Stock (the “Series B Certificate”) either (a) shall have been validly cancelled or (b) shall not have been amended; and

(vii)

the size of the Board shall remain fixed at five members, with at least three of such authorized five Board seats either (a) then-being occupied by persons having been designated by the Offeror, (b) then-being vacant, with the Company having publicly committed on a binding basis to fill such vacancies with persons designated by the Offeror or (c) then-being occupied by directors who shall have publicly submitted their irrevocable resignations from the Board, effective no later than the Offeror’s purchase of the Shares tendered in the Offer, which such resignations shall have been publicly accepted by the Company (with the Company having publicly committed on a binding basis to fill the resulting vacancies with persons designated by the Offeror).

According to the Offer to Purchase, the Offeror shall not be required to accept for payment or pay for any Shares validly tendered pursuant to the Offer, and may terminate or amend the Offer and may postpone the acceptance for payment of and payment for, Shares validly tendered, if any of the above conditions are not satisfied or waived by the Offeror prior to the Expiration Date and Time, or, if at any time at or prior to the Expiration Date and Time any of the following conditions shall occur:

 

While the Offeror has delivered to the Company a notice of (i) nomination of Ioannis (John) Liveris (the “Offeror Nominee”) for election to the Company’s Board as a Class II director at the next annual meeting of the Company’s shareholders (including any and all adjournments, postponements, continuations or reschedulings thereof, or any other meetings of the Company’s shareholders held in lieu thereof, the “2024 Annual General Meeting”) and (ii) a proposal to bring before the 2024 Annual General Meeting (a) a proposal that the Board be declassified prior to the first annual meeting of the Company’s shareholders after the 2024 Annual General Meeting (the “Declassification Proposal”) and (b) four proposals (each a “Vote of No-Confidence Proposal”) that the Company’s shareholders request the resignation from the Board of each of Andreas Michalopoulos, Loïsa Ranunkel, Alex Papageorgiou and Mihalis Boutaris, according to the Offer to Purchase, the Offer is not conditioned upon the Offeror Nominee being elected to the Board or the passage of the Declassification Proposal or any of the Vote of No-Confidence Proposals. Furthermore, according to the Offer to Purchase, the Offer is not conditioned upon the Offeror obtaining financing or upon any due diligence review of the Company.

 

According to the Offer to Purchase, the foregoing conditions are for the sole benefit of the Offeror, and may be waived by the Offeror at or prior to the Expiration Date and Time, in the Offeror’s sole discretion and subject to the applicable rules and regulations of the SEC (including the requirements of Rule 14d-4 under the Exchange Act). The Offer to Purchase further provides that failure by the Offeror at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right. According to the Offer to Purchase, should the Offer be terminated pursuant to the foregoing provisions, all tendered Shares not theretofore accepted for payment pursuant thereto shall forthwith be returned to the tendering shareholders. Furthermore, according to the Offer to Purchase, if the Offeror waives any of the conditions set out in sub-paragraphs (i) to (vii) and (a) to (h) above, the Offeror will promptly disseminate such waiver to all shareholders of the Company in a manner reasonably designed to inform them of such waiver and extend the Offer to the extent required by Rules 14d-4, 14d-6, and 14e-1 under the Exchange Act.

 

According to the Offer to Purchase, if the Offeror makes a material change to the terms of the Offer or the information concerning the Offer or if the Offeror waives a material condition of the Offer, the Offeror will disseminate additional tender offer materials and extend the Offer if and to the extent required by Rules 14d-4(d)(1), 14d-6(c) and 14e-1 under the Exchange Act.

According to the Offer to Purchase, the business address of the Offeror is c/o Levante Services Limited, Leoforos Evagorou 31, 2nd Floor, Office 21 1066 Nicosia, Cyprus, where the business phone number is +35 722 010610.

To the knowledge of the Company, except as described in this Schedule 14D-9, as of the date hereof, there are no material agreements, arrangements or understandings or any actual or potential conflicts of interest between the Company or its affiliates and the Offeror and its executive officers, directors or affiliates.

Affiliates of the Company’s Chief Financial Officer, including Oceanaut Capital MIKE, doing business as Seaborne Capital Advisors, a financial advisory firm of which the Company’s Chief Financial Officer is a director and sole member, have in the past been engaged by companies which are controlled by George Economou, and as such are affiliates of the Offeror, to provide financial advisory services for which they received compensation. None of the Company’s Chief Financial Officer nor any of his affiliates have received compensation from affiliates of the Offeror since 2018. In certain years prior to 2018, a significant portion of the revenues of Oceanaut Capital MIKE and other affiliates of the Company’s Chief Financial Officer were received from such affiliates of the Offeror, in the form of financial advisory fees consisting predominately of a transaction-based success fee ranging from 0.3% to 0.6% of the transaction value.

As of the date hereof, the number of the Company’s Common Shares and shares of Series C Preferred Stock held by the Company’s directors and officers is as set forth under “Item 7. Major Shareholders and Related Party Transactions” in the Company’s Annual Report on Form 20-F for the year ended December 31, 2022, filed with the SEC on April 28, 2023 (the “Annual Report”), which information is incorporated herein by reference. The Series C Condition requires the cancellation of all outstanding shares of Series C Preferred Stock for no or unspecified consideration and therefore a conflict of interest may exist between holders of Series C Preferred Stock and the Offeror.

In addition, to the knowledge of the Company, as of the date of this Schedule 14D-9, there are no material agreements, arrangements or understandings or any actual or potential conflicts of interest between the Company or its affiliates and the executive officers, directors or affiliates of the Company, except as may be discussed in the Company’s prior filings with the SEC, which can be found in the sections entitled: (i) “Item 3.D. Risk Factors – Company Specific Risk Factors” in the Annual Report; (ii) “Item 7. Major Shareholders and Related Party Transactions” in the Annual Report; (iii) “Item 6.B. Compensation” in the Annual Report; (iv) Note 5. (Transactions with Related Parties) to the Consolidated Financial Statements included in the Annual Report; and (v) “Limitations on Liability and Indemnification of Officers and Directors” in Exhibit 2.5 to the Annual Report, all of which information is incorporated herein by reference.

Special Committee

On October 12, 2023, the Board appointed a Special Committee of independent directors of the Board who the Board deemed independent and disinterested with respect to the Offer, consisting of Alex Papageorgiou, Loïsa Ranunkel and Mihalis Boutaris (the “Special Committee”), to review, evaluate and make recommendations on behalf of the Company to the shareholders of the Company with respect to the Offer and to authorize and take any and all action deemed necessary, advisable or appropriate by the Special Committee in connection with the Offer and any related matters. The Board also authorized the Special Committee to retain, at the expense of the Company, financial, legal and other advisors or consultants to assist and advise the Special Committee in connection with the performance of its duties.

As compensation for services being rendered in connection with serving on the Special Committee, and in accordance with Company’s past practice with respect to service on other committees of the Board, the Chairman of the Special Committee will be paid an additional $20,000 annually, and other members of the Special Committee will receive an additional $10,000 annually, and the members of the Special Committee will also be reimbursed for any reasonable out-of-pocket expenses incurred in the performance of their duties. In addition, the members of the Special Committee will be entitled to the indemnification provisions of the Company’s bylaws, to the same extent as any member of the Board acting as a director. Furthermore, as directors of the Company, the members of the Special Committee currently receive directors’ fees and other benefits as disclosed in the Annual Report.

Mr. Papageorgiou was appointed as Chairman of the Special Committee.

Shortly after the formation of the Special Committee, the Special Committee contacted prospective legal counsel and a financial advisor in connection with the Special Committee’s consideration of the Offer.

On October 15, 2023, the Special Committee determined to engage Richards, Layton & Finger, P.A. (“RLF”) as its independent legal counsel.

On October 18, 2023, the Special Committee engaged Newbridge Securities Corporation (“Newbridge”) as its independent financial advisor.

Between October 16, 2023 and October 25, 2023, the Special Committee held a series of meetings with its advisors to consider and discuss, among other things, the Offer, the conditions thereof and the Special Committee’s potential response thereto, the valuation analysis conducted by Newbridge with respect to the Offer and the Company, the Rights Agreement and certain related matters and considerations.

On October 25, 2023, based on the foregoing and other considerations, and after consultation with the Special Committee’s independent advisors, the Special Committee unanimously adopted resolutions determining that the Offer is not in the best interests of the Company or its shareholders and recommending on behalf of the Company that all of the Company’s shareholders reject the Offer and not tender any of their Shares pursuant to the Offer.

Between October 31, 2023 and November 10, 2023, the Special Committee held a series of meetings with its advisors to consider and discuss, among other things, the Offer as amended on October 30, 2023, the conditions thereof and the Special Committee’s potential response thereto, the valuation analysis conducted by Newbridge with respect to the Offer and the Company, the Rights Agreement, comments to this Schedule 14D-9 received from the staff of the Securities and Exchange Commission, and certain related matters and considerations.

On November 6, 2023, based on the foregoing and other considerations, and after consultation with the Special Committee’s independent advisors, the Special Committee unanimously adopted resolutions determining that the Offer, as amended on October 30, 2023, is not in the best interests of the Company or its shareholders and recommending on behalf of the Company that all of the Company’s shareholders reject the Offer, as amended on October 30, 2023, and not tender any of their Shares pursuant to the Offer, as amended on October 30, 2023.

Pursuant to the authority delegated to it by the Board and the authority vested under clause (ii) of the definition of Distribution Date (as defined in the Rights Agreement, and capitalized terms used in this paragraph and not defined herein have the meaning set forth in the Rights Agreement) under the Rights Agreement, on October 25, 2023, the Special Committee adopted resolutions to: (i) confirm that the Distribution Date shall not occur under the Rights Agreement upon the Close of Business on the tenth Business Day after the date that the Offer was first published or sent or given within the meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act and (ii) provide that the Distribution Date shall instead occur under the Rights Agreement on the next date on which the Distribution Date would occur under the Rights Agreement but for the commencement of the Offer on its original terms and conditions. After the Offeror amended the Offer on October 30, 2023, the Special Committee adopted additional resolutions on November 6, 2023 to confirm that the Distribution Date shall not occur under the Rights Agreement upon the Close of Business on the tenth Business Day after the date that such amendment to the Offer was first published or sent or given within the meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act and to provide that the Distribution Date shall instead occur under the Rights Agreement on the next date on which the Distribution Date would occur under the Rights Agreement but for the commencement of the Offer on its original terms and conditions and such amendment to the Offer (which, for the avoidance, may include the occurrence of the Close of Business on the tenth Business Day after the date that any subsequent amendment to the Offer, any subsequent modification or extension of the Offer or any subsequent waiver of any of the conditions of the Offer is first published or sent or given within the meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act), or in each case such later date as may be determined by action of the Board or the Special Committee. As a result, the Distribution Date under the Rights Agreement shall not occur upon the Close of Business on the tenth Business Day after the date that either the original Offer or the Offeror’s October 30, 2023 amendment thereto was first published or sent or given within the meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act. However, to the extent that the Rights Agreement remains in effect and the Distribution Date has not yet occurred, and the Offeror or any affiliate thereof makes any subsequent tender or exchange offer, subsequently waives any conditions to the Offer, subsequently extends the Offer or subsequently amends or otherwise modifies the Offer, the Distribution Date may occur on the Close of Business on the tenth Business Day after the date that any such subsequent offer or any such subsequent amendment to the Offer, subsequent modification or extension of the Offer or subsequent waiver of any of the conditions of the Offer is first published or sent or given within the meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act (or on such later date as may be determined by action of the Board or the Special Committee).

(a)	Recommendation.

After careful consideration, including a thorough review of the terms and conditions of the Offer, the Special Committee, after consultation with its financial and legal advisors, unanimously determined, for the reasons discussed in more detail below, that the Offer is not in the best interests of the Company or its shareholders and recommended on behalf of the Company that the Company’s shareholders REJECT the offer and NOT tender any Shares pursuant to the Offer.

If you have tendered your Shares in the Offer, you can withdraw them. For assistance in withdrawing your Shares, you can contact your broker.

(b)	Reasons for the Recommendation.

The Special Committee considered, among other things, the following list of factors (which are not necessarily listed in order of relative importance) in support of its recommendation on behalf of the Company that the Company’s shareholders reject the Offer and not tender their Shares in the Offer:

1.           In evaluating the Offer, the Special Committee received the advice and analysis of its independent financial advisor, Newbridge, as to the Company’s net asset value per Common Share in comparison to the consideration offered by the Offer. For purposes of this analysis, Newbridge calculated the Company’s net asset value per Common Share on a fully diluted treasury method basis (“NAV”) as of June 30, 2023, which Newbridge calculated as approximately $7.11 per share based on the Company’s interim financial statements for its fiscal quarter ending June 30, 2023 and estimates of the value of the Company’s fleet as of such date. Further, based on estimates of the Company’s asset value and liabilities as of September 30, 2023 analyzed by Newbridge, the Special Committee does not expect the Company’s NAV as of September 30, 2023 to materially differ from the Company’s NAV as of June 30, 2023.

The Company’s NAV was the primary factor considered by the Special Committee when making its recommendation on behalf of the Company. NAV was the primary factor considered by the Special Committee because the vessels used to operate the business of a ship-owning company comprise a vast majority of such a company’s balance sheet, and since a liquid and transparent market exists for such vessels, net asset value provides a useful approximation of the liquidation value of a company in this industry. For this reason, although in certain contexts and industries the public equity markets may emphasize certain multiples (such as EBITDA and price-to-earnings ratios), net asset value is a metric that is widely used and analyzed within the shipping sector, with many equity research analysts highlighting it in their reports, and many industry-specific newsletters using it as their central focus. The net asset value of a company equals the difference between the amount of a company’s assets and the amount of its liabilities, which calculation yields a liquidation value that is equal to the amount of distributable assets that the company would be expected to have remaining after all of its assets have been sold and all of its liabilities have been paid. Similarly, NAV per share, on a fully diluted treasury method basis, produces a per share liquidation value approximately equal to the per share amount that the stockholders of the Company would be expected to receive in a liquidation. Because of the significant amount by which the Company’s $7.11 NAV per share calculated by Newbridge exceeds the $3.00 Offer Price, the Special Committee believes that the Offer Price offers substantially less per share value than if the Company were to sell its vessels and other assets, pay off all of its debts and distribute all of the proceeds and remaining cash on its balance sheet to the Company’s stockholders. For this reason, the primary factor considered by the Special Committee in determining that the Offer Price is inadequate was the Company’s NAV per share in comparison to the Offer Price.

In addition, Newbridge advised the Special Committee as to the fact that the Company’s stock and the stock of specified other comparable mercantile shipping companies trade below the applicable company’s net asset value per share, which was based on Newbridge’s review of the recent trading price of the Common Shares during the past three months (which period was chosen as being most relevant to a shareholder’s decision whether to tender its Shares) and the market capitalization and estimated net asset value (in each case derived from public information) for each of the following companies: Top Ships Inc. (NasdaqCM:TOPS), Navios Maritime Partners L.P. (NYSE:NMM), Pyxis Tankers Inc. (NasdaqCM:PXS) and Toro Corp. (NasdaqCM:TORO). Newbridge deemed each of these companies as an appropriate comparable company for the Company because the Company and each of these comparable companies is a publicly-traded shipping company that is listed in the United States and has a significant portion of its fleet dedicated to tanker ships. As explained above, net asset value is a metric that is widely used and analyzed within the shipping sector. To estimate the net asset value of each of the selected comparable companies, Newbridge calculated each company’s Tangible Book Value (which is equal to the company’s net asset value, less the value of any intangible assets). Because each of the selected comparable companies operates in the shipping industry and has limited intangible assets, Newbridge determined that the Tangible Book Value for each such company approximates (and does not differ in any material respect from) its net asset value. Newbridge divided the market capitalization of each selected comparable company by its Tangible Book Value, which produced a range of ratios for the selected companies of approximately 14.0% to 64.0%. Newbridge observed that the trading price for each selected company fell below the company’s estimated net asset value per share. The considerations described in this paragraph were not a primary factor in the Special Committee’s recommendation, but were instead used by the Special Committee to confirm that the Company is not uniquely situated in having its stock trade below its NAV per share and to confirm its conclusion, based on the significant amount by which the Company’s $7.11 NAV per share calculated by Newbridge exceeds the $3.00 Offer Price and the current trading price of the Common Shares, that both the trading price of the Common Shares and the Offer Price (representing a premium to the trading of the Common Shares) do not reflect the intrinsic value of the Company.

Additionally, the Special Committee considered its favorable view of the Company’s future prospects based primarily on the continuous efforts of the Company’s management team to improve the Company’s balance sheet, opportunistically upgrade the Company’s fleet of vessels and charter the Company’s vessels with high quality partners within favorable market conditions consistent with the strategy that has previously been outlined by the Company in its public disclosures, including as disclosed in the Company’s Annual Report (and, in particular, the disclosure therein under the section titled “Business Strategy”) and the Company’s July 27, 2023 press release regarding its results for the second fiscal quarter of 2023 (filed as Exhibit 99.1 to the Form 6-K filed by the Company on such date). Based on the foregoing, the Special Committee considered the possibility that the Company could generate additional value for its stockholders through the continued operation of its business. The considerations set forth in this paragraph regarding the Company’s future prospects were not a primary factor in the Special Committee’s recommendation and were instead used by the Special Committee to further confirm its conclusion, based on the significant amount by which the Company’s $7.11 NAV per share calculated by Newbridge exceeds the $3.00 Offer Price and the current trading price of the Common Shares, that both the trading price of the Common Shares and the Offer Price (representing a premium to the trading of the Common Shares) do not reflect the intrinsic value of the Company.

While the Special Committee also considered the fact that the Offer Price represents a premium to the trading price of the Common Shares during the three-month period referenced above, based on the significant amount by which the Company’s NAV per share (or per-share liquidation value) exceeds the Offer Price, together with the ancillary confirmatory considerations described above regarding the stock of the specified comparable companies trading below net asset value per share and the Special Committee’s favorable view of the Company’s future prospects and the possibility that the Company could generate additional value for its stockholders in excess of the current liquidation value through the continued operation of its business, the Special Committee concluded that both the trading price of the Common Shares and the Offer Price (representing a premium to the trading price of the Common Shares) do not reflect the intrinsic value of the Company. As a result, the Special Committee concluded that the Offer Price is inadequate and that it is not in the best interests of the holders of the Common Shares to tender their Common Shares in the Offer, and recommended on behalf of the Company that the holders of Common Shares not tender their Common Shares in the Offer.

Based on the foregoing, the Special Committee believes that the Offer does not present an opportunity to maximize value for holders of Common Shares and instead represents an opportunistic attempt by the Offeror to acquire all or substantially all of the Company at a significant discount to the Company’s intrinsic value to the detriment of the holders of the Common Shares. If the Offeror were to successfully acquire control of the Company through the Offer, the Special Committee believes, based on the Company’s NAV per share calculated by Newbridge, that this could allow the Offeror to realize a return significantly in excess of the Offer Price on a relatively short timeline through the liquidation of the Company, which return would not be shared with current holders of Common Shares to the extent that their Common Shares are tendered and acquired by the Offeror in the Offer.

The Special Committee and the Company believe that the Special Committee’s views as to the intrinsic value of the Company are consistent with actions taken by the Company and the Board earlier this year in adopting the Company’s US$2.0 million share repurchase plan publicly announced on April 4, 2023 and, after successfully completing that plan, in adopting the Company’s new US$2.0 million repurchase plan publicly announced on August 21, 2023.

Based on all of the above, the Special Committee concluded that, as the Company’s NAV per share exceeds the Offer Price, the Offer undervalues the outstanding Shares.

2.           The Special Committee believes that the several conditions to the Offer, including conditions which are not within the authority of the Board or the Company, create significant doubt that the Offer will ever be consummated, and in particular, significant doubt as to whether the Offer will be consummated by the stated expiration date of the Offer. For example, pursuant to the Series C Condition, the Offer is conditioned on the cancellation of the Company’s outstanding shares of Series C Preferred Stock (and certain Common Shares issued in respect of the conversion thereof), or, in the alternative and with equivalent effect, the distribution by the Company to its common shareholders of Remedial Rights to purchase Remedial Shares, which, when issued, would put the Company’s common shareholders (other than the Insider Holders) in the same economic, voting, governance and other position as such common shareholders would have been in had the Series C Preferred Stock issued to the Insider Holders been cancelled for no consideration (the “Series C Alternative Condition”). The Offer to Purchase states that the Series C Condition is within the control of the Company and the Board. However, the Special Committee believes that none of the Company’s governing documents, including its Articles of Incorporation and bylaws and the Series C Certificate, or applicable law, including the BCA, grant the Company, the Board or the Special Committee the authority to effect a cancellation of the Series C Preferred Stock at this time. Additionally, the Special Committee has carefully evaluated the transactions described in the Offer to Purchase which the Offer to Purchase proposes would satisfy the Series C Alternative Condition, and believes that satisfying the Series C Alternative Condition is not in the control of the Company, the Board or the Special Committee, for the following independently sufficient reasons: (i) that the requirement of the Series C Alternative Condition that the holders of Shares be put in the “same economic, voting, governance and other position as such common shareholders would have been in had the Series C Preferred Stock issued to the Insider Holders been cancelled for no consideration” is not capable of being satisfied through the issuance of additional preferred shares of the Company, as stated in the Offer to Purchase, to the extent that the currently outstanding shares of Series C Preferred Stock and their associated economic, voting, governance and other rights, powers and preferences, which, for the reasons stated above, the Special Committee believes the Company has no power to cancel or nullify at this time, remain outstanding, (ii) any set of transactions involving the consummation of the Offer through the purported satisfaction of the Series C Alternative Condition would require the consent of the holders of a majority of the outstanding shares of Series C Preferred Stock, which is required under the terms of the Series C Certificate to amend the Company’s Articles of Incorporation, to establish a new series of preferred stock that ranks superior to or equal to the Series C Preferred Stock, or to effect a change of control of the Company, and (iii) the Special Committee believes that any set of transactions which has the effect of, or an effect equivalent to, cancelling shares held by certain shareholders, for no consideration, as is required by the Series C Condition, would be an improper exercise of authority by the Board or the Special Committee under Marshall Islands law. As a result, the Special Committee believes that the satisfaction of the Series C Condition is not within the control of the Company, the Board or the Special Committee, and the Offeror’s statement to the contrary is false. In addition, the Special Committee notes that, despite the inclusion of the Series C Alternative Condition, which purportedly could be satisfied without the cancellation of the Series C Preferred Stock, the Equity Condition, which requires as a condition of the Offer that no Series C Preferred Stock remain outstanding, continues to operate to require that all outstanding shares of Series C Preferred Stock be cancelled to satisfy the conditions to the Offer. As discussed above, the Special Committee believes that none of the Company, the Board or the Special Committee has the authority to effect a cancellation of the Series C Preferred Stock at this time. In light of the foregoing, the Special Committee believes that the Offer is illusory in that the Offer is subject to conditions which the Company, the Board and the Special Committee cannot unilaterally cause to be satisfied at this time.

To the Company’s knowledge, as of November 10, 2023, 1,451,044 shares of Series C Preferred Stock are outstanding and 1,371,134, or approximately 94.5%, of such shares are held by Mango Shipping Corp. and Mitzela Corp., which are Insider Holders and affiliates of the Company. To the Company’s knowledge, no other affiliates of the Company hold Series C Preferred Stock. The ownership of Series C Preferred Stock by the other Insider Holders is not known to the Company.

The foregoing discussion of the information and factors considered by the Special Committee in reaching its conclusions and recommendations on behalf of the Company is not exhaustive, but rather includes the material reasons and factors considered by the Special Committee.

(c)	Intent to Tender.

The Company’s directors and executive officers are entitled to participate in the Offer on the same basis as the Company’s other shareholders. However, after reasonable inquiry and to the best knowledge of the Company, none of the directors or executive officers of the Company intends to tender or sell any Shares held of record or beneficially by such person for purchase pursuant to the Offer.

Further, after reasonable inquiry and to the best knowledge of the Company, none of the Company’s subsidiaries or other affiliates currently intends to tender or sell any Shares held of record or beneficially by such person for purchase pursuant to the Offer.

The Company has retained Joele Frank, Wilkinson Brimmer Katcher (“Joele Frank”) as its public relations advisor in connection with the Offer. The Company has agreed to pay customary compensation to Joele Frank for such services, which includes a quarterly fee based on customary hourly rates and a $60,000 retention fee. In addition, the Company has agreed to reimburse Joele Frank for certain expenses and indemnify it and certain related persons against certain liabilities relating to or arising out of the engagement.

The Special Committee has retained Newbridge as its independent financial advisor in connection with the Offer. The Company has agreed to pay a fee of $30,000 to Newbridge for such services. In addition, the Company has agreed to reimburse Newbridge for certain expenses and indemnify it and certain related persons against certain liabilities relating to or arising out of the engagement.

Except as set forth above, to the knowledge of the Company, neither the Company nor any person acting on its behalf has directly or indirectly employed, retained or agreed to compensate any person to make solicitations or recommendations to the Company’s shareholders concerning the Offer.

Based on the Company’s records and reporting policies and on information provided to the Company by its directors, executive officers, affiliates and subsidiaries, during the 60 days prior to the filing of this Schedule 14D-9, no transactions with respect to the Common Shares have been effected by the Company, its executive officers, directors, affiliates or subsidiaries.

The Company has not undertaken and is not engaged in any negotiations in response to the Offer that relate to or would result in: (i) a tender offer or other acquisition of the Company’s securities by the Company, any of its subsidiaries or any other person; (ii) an extraordinary transaction, such as a merger, reorganization or liquidation involving the Company or any of its subsidiaries; (iii) a purchase, sale or transfer of a material amount of assets of the Company or any of its subsidiaries; or (iv) any material change in the present distribution or dividend rate or policy, or indebtedness or capitalization of the Company.

Additionally, there is no transaction, board resolution, agreement in principle, or signed contract in response to the Offer which relates to or would result in one or more of the foregoing matters.

Cautionary Note Regarding Forward-Looking Statements.

In addition to these important factors, other important factors that, in the Company’s view, could cause actual results to differ materially from those discussed in the forward-looking statements include, but are not limited to those detailed under “Item 3.D. Risk Factors” in the Annual Report. Except as otherwise required by the federal securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statements made after the date hereof, whether as a result of new information, future events, changed circumstances or any other reason.

SIGNATURE

After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

 

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