Performance Shipping Inc. Annual Report: A Plain-English Guide

I’ve put together this guide to help you understand how Performance Shipping Inc. operates. My goal is to translate complex financial filings into simple terms so you can decide if this company fits your investment goals.

1. What does this company do?

Performance Shipping is a tanker company. Think of them as the "middlemen" of the global oil market. They own and operate a fleet of Suezmax tankers that transport crude oil and petroleum products.

They make money by chartering ships in two ways:

• Spot charters: Renting a ship for a single voyage at current market rates.
• Time charters: Renting a ship to a customer for a fixed period at a set daily rate.

Their profit depends on global oil demand and the availability of tanker space.

2. Financial Health and Risks

The company is in a transition period and carries significant debt. As of late 2025, they owed $128.7 million in bank loans and $100 million in bonds. These debts require steady cash for interest and principal payments, which limits the money available for growing the fleet or paying shareholders.

A note on your investment:

• Control: Chairperson Aliki Paliou controls roughly 88% of the voting power. This means she makes the decisions, and your vote as a regular investor carries almost no weight.
• Management Conflicts: Key executives provide services to other shipping companies. This creates a conflict of interest where management’s time and attention may be divided.
• Foreign Status: As a "foreign private issuer" from the Marshall Islands, the company is exempt from certain U.S. reporting requirements. This means you get fewer financial updates and less transparency than you would with a U.S.-based company.

3. The Dilution Trap and Stock Volatility

This is the most important part for you: Your ownership stake is at constant risk of shrinking.

• Dilution: The company has many "convertible securities"—essentially IOUs that can turn into new shares. If they sell shares at a low price, they often trigger the creation of even more stock. This spreads your ownership across a larger pool, reducing the value of your slice of the company.
• Reverse Splits: The company has performed eight reverse stock splits since 2016. Companies often do this to artificially boost their share price to stay listed on the Nasdaq.
• Meme-Stock Risk: The company warns that its stock price often swings wildly due to social media chatter rather than actual business performance. This creates a high-risk environment for long-term investors.

4. The Dividend "Illusion"

• No Guarantees: The board can stop paying dividends at any time to cover ship repairs or debt.
• Payment in Stock: They may pay dividends in shares instead of cash. This saves them money but further reduces your ownership percentage.
• Preferred Shares: "Series B" and "Series C" preferred shareholders get paid before you. These shares are not traded on public exchanges, making them difficult to sell.

5. Operational & Regulatory Risks

• The "Green" Squeeze: New environmental rules require costly ship upgrades. If the company fails to comply, they may be unable to trade their vessels.
• Debt Covenants: Their loans require the value of their ships to stay above a certain level. If ship values drop, the bank can demand immediate repayment. If the company cannot pay, they may be forced to sell ships at a loss.

Final Thought for Investors: When considering an investment in Performance Shipping, weigh the potential for tanker market gains against the significant risks of dilution, high debt, and limited shareholder control. Because the company’s structure prioritizes debt repayment and majority-owner control, it is essential to determine if the potential for dividends or share price appreciation outweighs the risk of your ownership stake being reduced over time.