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Odyssey Marine: Black Swan Shorts Sweating Bullets Post-Ruling

|Includes: Odyssey Marine Exploration, Inc. (OMEX)

The rapid rise in Short Interest going into the ruling on Odyssey Marine’s Black Swan forces one to tip their cap to those on dark side, well done.  The only problem: the stock didn’t get crushed.  Now, the risk is skewed to the upside with plenty of stock still sold short.

I stick by my analysis that the company continues to be undervalued and still believe the stock is worth $5+.  Here why:

  • Dorado, now rolled into Neptune Minerals, is one of the most interesting stories in mining.  Will it definitively work?  It is hard to tell, but if they gain traction … hold on.  Adjusting for the stock offering, I assign $100M of value to Odyssey’s stake – which is $1.37/share.
  • Gairsoppa:  Assuming they recover less than ½ of the silver bullion thought to be on board and retain 80% of the proceeds, this equates to $1.09/share.
  • Intellectual Property & Assets:  I stick with $2/share based on their technology and the value lenders assign to the assets.
  • All other wrecks:  Conservatively, I add $1 for a PV for all the remaining wrecks.

In summary, I still arrive at a target north of $5/share for OMEX.  The market seems to believe the prospects for other recoveries and mining outweigh the disappointment of the Black Swan ruling.  With a conference call Monday that may or may not provide additional information on existing projects, there is the potential for a full blown short squeeze. Stay tuned.

Disclosure: I am long OMEX.