Sell-side analysts desperate to add a little flair to dry research reports will try to spice things up by talking about "hidden treasure," "deep dives," or "plumbing the depths". Well, there is a company that actually does all of that. Odyssey Marine Exploration (Nasdaq:OMEX) is primarily in the business of finding and salvaging wrecked ships and it may be one of the strangest companies that trades on U.S. exchanges.

Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

What They Do
Odyssey Marine operates several simultaneous and overlapping businesses. The core of what the company does is the use of advanced underwater technologies to find, characterize and salvage shipwrecks - often ships from the Age of Sail that sank with ample amounts of gold or silver on board. That is not all that the company does, though. Odyssey Marine also assists in more conventional salvage and recovery operations, conducts deepwater mineral exploration projects, and operates a museum exhibit that highlights some of the artifacts that the company has recovered from shipwrecks.

What's New
Investors may already suspect that this is a highly news-driven story and they would be right. Unfortunately, this is a story where the news can cut both ways. At present, the company is wrangling in court with the Spanish government over the rightful ownership of the 17 tons of gold and silver coins and artifacts found in the wreckage of the Nuestra Senora de las Mercedes - a Spanish galleon that sank in 1804. Spain has claimed, and U.S. courts have thus far supported, that it was a military ship and therefore protected by law from treasure hunters.

If Odyssey can get a reversal on appeal in its favor, it could be worth upwards of $500 million to the company. That said, maritime and salvage law is complicated and the outcome is uncertain.

On a more positive note, the company has just announced the confirmation of the discovery of the SS Gairsoppa - a British ship that was torpedoed in 1941 carrying 7 million ounces of silver. While the company will be splitting this with the British government (with the Brits getting 20%), the haul could still be worth upwards of $225 million (and possibly more, as collectors will often pay premiums above the metal value for coins or bullion that can be tied to specific ships or wrecks).

A Different Play on Metals
Although there is some value to cannons and other nautical memorabilia, Odyssey is in some ways like a permanently prospecting mining company. That gives it some of the upside in gold and silver prices that investors find in ETFs like SPDR Gold Shares (NYSE:GLD) and iShares Silver Trust (NYSE:SLV), but clearly quite a bit more risk than in those ETFs or conventional miners like Barrick Gold (NYSE:ABX) or Newmont Mining (NYSE:NEM).

There's also a possible upside kicker from the deep-sea mining angle. Underwater mining is not really a major factor yet in the world, though diamond giant DeBeers does exploit offshore African sediments for diamonds. There is thought to be major potential to find deposits of precious metals and more conventional metals like zinc or cobalt, and while the environmental concerns are very real, and if companies like Neptune Minerals and Nautilus Minerals find some success, maybe major players like Rio Tinto (NYSE:RTP) or BHP Billiton (NYSE:BHP) will look to follow.

Of course, Odyssey Maritime doesn't have the ocean to itself. Major shipping companies like Maersk have the resources and equipment to run salvage operations as well (though typically with more mundane targets in mind), and insurance companies will frequently contract with private salvage teams to try to locate lucrative wrecks. Moreover, it's not impossible to imagine that companies like Cal-Dive (NYSE:DVR), Oceaneering (NYSE:OII) or Transocean (NYSE:RIG) could get involved if undersea mining exploration really becomes a meaningful opportunity.

The Bottom Line
Is Odyssey Maritime right for your portfolio? It's a small company (below $250 million in market cap) with minimal analyst or institutional support and no history of profitability or cash flow generation. At a minimum, it is an extremely risky and speculative play - sure, there are plenty of wrecks out there to salvage, and likely hundreds of millions of dollars of gold and silver laying on the ocean floor, but finding these ships is not easy, recovering the treasure is not easy, and fighting in court for the right to keep it is not easy.

It would be absurd to try to talk about a model or fair value here. This is quite literally an investment in a treasure hunting expedition. Accordingly, it's a gamble and not an investment. That said, who cares? Investing is certainly a serious and sober endeavor, but there is also room for fun and flights of fancy. So long as people don't expect a stake in Odyssey Maritime to pay for the kid's tuition or their retirement, there's nothing wrong with the occasional punt on a speculative (if somewhat romantic) idea. (For additional reading, take a look at Investing In The Metals Markets.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: United States Brent Oil Fund

    Learn more about the United States Brent Oil exchange-traded fund, the characteristics of the fund and the suitability and recommendations of it.
  2. Mutual Funds & ETFs

    ETF Analysis: ProShares Ultra Bloomberg Crude Oil

    Find out more about the ProShares Ultra Bloomberg Crude Oil ETF, the characteristics of UCO and the suitability and recommendations of UCO for investors.
  3. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI Hong Kong

    Learn about the iShares MSCI Hong Kong fund, which invests in various equities of companies listed on the Hong Kong Stock Exchange.
  4. Mutual Funds & ETFs

    ETF Analysis: Vanguard Small-Cap Growth

    Take a close look at the Vanguard Small-Cap Growth ETF, which focuses on domestic small-cap equities with a fundamental growth strategy.
  5. Mutual Funds & ETFs

    ETF Analysis: First Trust Dorsey Wright Focus 5

    Take a closer look at the First Trust Dorsey Wright Focus 5 ETF, a unique and innovative fund of funds based on momentum and relative strength.
  6. Mutual Funds & ETFs

    ETF Analysis: iShares National AMT-Free Muni Bond

    Take an in-depth look at the iShares National AMT-Free Municipal Bond ETF, a highly diverse and very popular muni bond fund.
  7. Mutual Funds & ETFs

    Top 3 Switzerland ETFs

    Explore detailed analysis and information of the top three Swiss exchange-traded funds that offer exposure to the Swiss equities market.
  8. Stock Analysis

    Net Neutrality: Pros and Cons

    The fight over net neutrality has become an amazing spectacle. But at its core, it's yet another skirmish in cable television's war to remain relevant.
  9. Mutual Funds & ETFs

    7 Best ETF Trading Strategies for Beginners

    Exchange-traded funds are ideal instruments for beginning traders and investors. Learn the seven best strategies for trading ETFs.
  10. Mutual Funds & ETFs

    ETF Analysis: SPDR Dow Jones International RelEst

    Learn how the SPDR Dow Jones International Real Estate exchange-traded fund (ETF) is managed and for whom the ETF is most appropriate.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  3. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  4. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  5. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  6. Lion economies

    A nickname given to Africa's growing economies.
RELATED FAQS
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  4. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  5. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  6. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!