Is Tampa's Odyssey Marine Exploration a looming shipwreck for investors?
Or is the treasure hunting firm a target of an ambitious short seller whose strategy is to dredge up bad publicity on a company and then profit on downswings in its stock price?
One thing is clear. Odyssey Marine is now in the cross hairs of a 20-something hedge fund manager named Ryan J. Morris. The founder of Meson Capital recently issued a 66-page report trashing the company, whose stock trades under the ticker symbol OMEX. The report's headline: Do Investors Know What Lies Beneath the Surface?
"We believe OMEX stock is worth $Zero and if OMEX is unable to raise equity they will be forced to file bankruptcy within the next 6 to 12 months," Morris warns.
There may be legitimate questions raised about Odyssey Marine. My take? I find Morris' specific warning of potential bankruptcy overblown and manipulative. There have been occasions when Odyssey Marine needed fresh funding and new money was found. The next round will likely be even easier.
So it comes to this: Is Morris driving down Odyssey's stock because his Meson Capital has bet against the stock? Why else would a San Francisco hedge fund otherwise spend so much time on a small Tampa company?
That's the short seller's way. And it is a common scheme used against cheap stocks that face large swings in value with modest changes in share price.
Morris' report is critical of the company's well-paid executives and skeptical of the firm's offshore financial dealings. In response, Odyssey shares fell this month to the low $2 range.
The report suggests Odyssey has ties to foreign businesses involved in money laundering, among other questionable practices.
In its defense, Odyssey held a teleconference earlier this month, slamming Morris for his "short and distort" strategy and for his issuing a report without even talking to Odyssey Marine.
Odyssey president Mark Gordon argues the treasure hunting firm is well positioned to recover valuable cargo — to the tune of $50 million annually for years to come — from a series of already documented shipwrecks. At the top of that list is the British cargo ship SS Gairsoppa, sunk by a German U-boat in 1941 with more than 100 tons of silver ingots on board.
"With this year's completion of the huge silver recovery from the SS Gairsoppa … we've proven our capabilities to successfully locate and extract significant value from 20th-century commodity shipwrecks," Gordon stated.
Morris landed in the spotlight in late 2012 when Bloomberg TV hyped him as an emerging "activist investor."
"Do you see yourself as the next Carl Icahn?" Bloomberg asked Morris. Bloomberg also compared him to the Bill Ackman (who recently shorted Herbalife) and Dan Loeb (whose fund made $1 billion in Yahoo)?
Odyssey says it has contacted market authorities and may take legal action.
All hands on deck.
Robert Trigaux can be reached at [email protected]