For any of you who watch public television, you may have seen a fascinating segment profiling the underwater exploration of a shipwreck site called the S.S. Republic, discovered in 2003 after twelve years of searching.
That ship had sunk off the coast of Georgia in 1865 carrying a cargo of coins valued at the time at about $400,000, which in today's money is almost $200 million. It had been headed to New Orleans with the coins and other supplies to help in reconstruction after the Civil War.
You can see the page National Geographic set up here full of history and images.
More recently, the company announced in May 2007 that it had discovered a larger, still-unknown wreck off the coast of Spain code-named the “Black Swan”, with a treasure of coins and artifacts estimated to be worth about $500 million.
Can you say, “YARRR?!?”
Odyssey Marine Exploration is the company behind both of those finds. They primarily operate in shipwreck exploration but also have a themed shipwreck segment, exhibiting treasures and showcasing exploration methods. And if you can believe it, this is a publicly-traded company with the symbol OMEX on the Nasdaq.
So what's the big deal, you ask?
Well, according to this researcher we currently have a massive price dislocation, based on short-term news in terms of fundamentals versus valuation, and it's an opportunity worth capitalizing on immediately, before investors realize that they missed a huge chance to pick up shares on the cheap.
Shares closed at $5.0001 on Friday, giving the company an equity cap of just $235 million.
After the announcement of the discovery of the “Black Swan” the stock shot up from $4.60 on May 17 to $8.32 per share on May 18, an increase of 81%. At $8.32 per share the market cap is just under $400 million.
I know what you're thinking.... a current $235 million market cap when they just found $500 million of treasure? How can this be possible?
Well, the reason for such a low current valuation compared to find is because of short-term news, where the OMEX exploration vessel the Ocean Alert handling the “Black Swan” effort was forced to return to Spain after an apparent surprise boarding only a few days after leaving Gibraltar. Spanish officials had seized documents and even a laptop to gain information about the vessels activity.
According to Spanish newspapers the recovery effort was being conducted illegally, despite full transparency and OMEX covering all legal bases beforehand. Spain seems to think that the ship was in Spanish waters when in fact it is located in international waters in the Atlantic, unaffiliated with any country's territory.
Scurvy dogs the Spanish be, right!?
Odyssey has been straightforward and conservative in its approach to other shipwreck sites and I believe this time is no different.
So OMEX is wrapped up in court right now, trying to prove that their efforts are legitimate and have been made so by abiding by all necessary and applicable international laws. In the near term, this could put downward pressure on the stock.
But in the longer term, I have every reason to believe that OMEX is on the level and will persevere. And more importantly for us that the stock price will flourish.
Just think about the numbers.
To get to a $500 million market cap means that the stock would see $10 per share, and that is the value of the treasure from just ONE of their shipwrecks, the “Black Swan”.
I think you can extrapolate out what else can happen from there....
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