Odyssey Marine Exploration (NASDAQ:OMEX) claims they have three business lines that could each provide significant upside. We aim to shed light on each of these using expose public information.
1) Historical Shipwrecks: OMEX claims the potential to have a large one time find like the "Black Swan" or HMS Sussex. The only specifically mentioned active project is HMS Victory.
2) Commodity Shipwrecks: OMEX claims $50mm+ of 5,000+ tons of commodity non-bullion metal such as copper or tin that are "under contract" per recovery with four in the pipeline.
3) Undersea Mining: OMEX claims to have a "World Class" reserve of undersea minerals through either Neptune (30% owned) or Oceanica (~50% owned).
This article focuses on OMEX's HMS Victory project. We have written two other in-depth investigative reports on Oct 31 and Nov 15 that can be found at www.omextruth.com.
By utilizing the UK Freedom of Information Act, we have confirmed that there is an active government investigation in the UK regarding OMEX's activities at the HMS Victory site where they may have acted without a license or prior consent from the UK Secretary of State for Defence. The Company has not disclosed this to investors as a material risk factor in their most recent SEC filings. Based on the adverse outcome with the "Black Swan" case with Spain, and the lack of updates on the HMS Victory, we believe that Odyssey will not profit from their contract with the Maritime Heritage Foundation to salvage the HMS Victory.
Full FOI Response dated Nov 19, 2013: relevant excerpt below:
I feel it is important to note that the Marine Management Organisation (MMO) is responsible for regulating licensable marine activities within the UK marine area in accordance with the provisions of Part 4 of the Marine and Coastal Access Act 2009 and other associated secondary legislation. This responsibility involves ensuring that any licensable marine activity (as defined in Section 66 of the Act) is properly undertaken in accordance with a marine licence and any associated conditions. It also involves taking enforcement action where such activity occurs without a marine licence or other consent.
In line with the above responsibility, we are currently undertaking an investigation into alleged activity in relation to the site of HMS Victory 1744.
As this investigation is currently ongoing we are unable to release any further details relating to the investigation
The investigation has the potential for serious repercussions if violations occurred, as it could potentially result in imprisonment:
As stated in the FOI request, the MMO is responsible for Part 4: Marine Licensing of the Act which can be found here. The section on enforcement details potential for "fine or to imprisonment" - this ability to imprison upon "breach of requirement for, or conditions of, a license" implies a potentially criminal (as opposed to civil) offense.
Part 4: Marine Licensing; Chapter 3: Enforcement; Section 85: Breach of Requirement for, or conditions of, a license:
85Breach of requirement for, or conditions of, a licence
(1) A person who-
(NYSE:A) contravenes section 65(1), or
(NYSE:B) fails to comply with any condition of a marine licence,
commits an offence.
(2) A person who is bound by a condition of a licence by virtue of section 71(5) is not to be taken as having failed to comply with the condition unless the requirements of subsection (3) are satisfied.
(3) The requirements are that-
the appropriate licensing authority has served the person with a notice under this subsection which specifies the condition together with a period (which must be a reasonable period, in all the circumstances of the case) within which the person must comply with the condition, and
the person has failed to comply with the condition within that period.
(4) A person guilty of an offence under subsection (1) is liable-
on summary conviction, to a fine not exceeding £50,000;
on conviction on indictment, to a fine or to imprisonment for a term not exceeding two years or to both.
Rather than disclose this ongoing investigation to investors, the latest update from Odyssey Nov 12th in their press release was:
HMS Victory: Odyssey continues to cooperate with the Maritime Heritage Foundation and the UK Government on the project and is awaiting instructions from the Foundation to continue work on the site. Odyssey is the archaeological contractor of the Maritime Heritage Foundation, owner of the wreck site following a gift from the Ministry of Defence in January 2012.
What is the Maritime Heritage Foundation?
The back story of the HMS Victory discovery and attempted salvage with by Odyssey Marine under contract to the Maritime Heritage Foundation is highly controversial in the UK. In addition to failing to disclose this ongoing investigation, we believe OMEX is:
1) Misrepresenting OMEX's influence over the project, which is in fact dictated by the MOD.
2) Deliberately and consistently misspelling the name "Balchin" to misrepresent their relationship to the descendants of Admiral Sir John Balchen, who captained HMS Victory.
1) April-June 2010: OMEX and Lord Lingfield (aka "Sir Robert Balchin") roughly simultaneously submit proposals to the UK government suggesting that a charity be set up to hold the HMS Victory site.
2) October 2010: The "Sir John Balchin Maritime Heritage Foundation" is founded by Lord Lingfield (aka "Sir Robert Balchin"), who does not appear to have had any prior experience or interest in maritime archaeology.
3) March 2011: Foundation Renamed to "The Maritime Heritage Foundation" ("MHF"), removing the "Sir John Balchin" name after the true descendants of the Admiral protested that Lord Lingfield and Odyssey misrepresented Lord Lingfield as a descendent of Admiral Sir John Balchen - he is NOT.
a. The charity appears to have zero activity in 2010 or 2011 and in March 2012 only has total donations of £43,716.
b. An active consultant for the charity appears to be Dr. Sean Kingsley of Wreck Watch International; we believe his primary client base since at least 2008 has been for OMEX or clients working with OMEX.
4) January 2012: Lord Lingfield requested the Ministry of Defence accept Odyssey's definition of personal property from the wreck which would have led to his own charity paying Odyssey 80% commission instead of 50% on the commercial salvage contract which he negotiated with Odyssey.
a. Why would Lord Lingfield, negotiating on behalf of MHF, ask for even better terms for Odyssey?
5) January 2012: MHF became the legal owners of the Victory wreck by Deed of Gift with restrictions so that that ultimately the MOD controls all actions and the MHF/OMEX may NOT undertake any works on the wreck site without the consent of the UK Secretary of State for Defence.
The UK Press has picked up on this situation and questions how an individual with no apparent prior maritime archaeology experience could set up a charity that appears to have no operations, and receive the concession of one of the greatest historical shipwrecks in UK history requiring sensitive and complex project management.
Q: Is the Maritime Heritage Foundation just a front for OMEX? Will the UK people stand for this?
The Actual Descendants of Sir John Balchen Protest
The actual descendants of Sir John Balchen, the famous fighting Admiral who went down with his Flagship and her entire crew of over one thousand officers and men, have worked hard to clarify the fact that Lord Lingfield is in fact NOT a descendant of the Admiral and have set up a public document (with references) to set the record straight.
The descendants appear to have done this as a response to profiteers trying to make misrepresentations to piggy back off of the Balchen name. For example on Feb 2, 2009, OMEX appears to have deliberately and consistently misspelled the name of Balchen to "Balchin" (e vs i) to match Lord Lingfield's name, who is in fact NOT a descendant of Admiral Sir John Balchen.
OMEX persists with this misleading "Balchin" misspelling today.
The UK Press Investigates the HMS Victory Situation
While reading the details of this and factoring in any UK-specific bias you may believe to exist, consider what a Florida Judge, on Odyssey's home turf, says of OMEX officially in court:
"Odyssey's cynically deploying a few random nodes of truth to the end of evading the acknowledgement of an over-arching and regnant truth." -Judge Steven D. Merryday in the Sept 25, 2013 'Black Swan' ruling against Odyssey1
There is a much more detailed and thorough investigation into this overhyped connection in the Heritage Daily, a UK periodical:
A second article based on correspondence with the Ministry of Defence and Freedom of Information Requests, revealed that OMEX had been preparing cannon for lifting before any consent for this work had been given by the UK Secretary of State for Defence. We believe this potential breach of the strict terms of the Deed of Gift is also under investigation by the Ministry of Defence and its advisors in parallel with the investigation by the Marine Management Organization.
Ministers Jeremy Hunt and Philip Hammond are in the firing line as the Ministry of Defence admits Odyssey Marine Exploration is already preparing to cash in on HMS Victory … without the permission of the Government.
In a major and disturbing development in the growing HMS Victory scandal, the Ministry of Defence has been forced to admit that the flagship of American commercial salvage company Odyssey Marine Exploration Inc. the Odyssey Explorer, has been actively preparing to recover artefacts from the wreck site of HMS Victory, the flagship of Admiral Sir John Balchen, lost with all hands in October 1744, even before permission has been given by Government Ministers Jeremy Hunt and Philip Hammond to permit the recovery of artefacts from the ship.
Most recently, an article in the Independent newspaper in the UK also confirmed that the Marine Management Organization investigation into Odyssey's conduct on the HMS Victory site was ongoing and was reviewing video evidence from the Television series "Silver Rush" UK Title "Billion Dollar Wreck Hunt," which showed the apparent discovery of a human skull on the wreck site.
 CASE NO. 8:07-cv-614-T-23MAP - Docket 364, p12, sentence starts with "Odyssey's characterizing her as a "vessel . . . assigned to transport mail, private passengers, and consignments of merchant goods and other cargoes" is a splendid and representative example of...Odyssey's…"
Disclosure: I am short OMEX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.