Odyssey Marine Exploration Inc., the deep-ocean salvage company that has recovered millions of dollars of precious metals from shipwrecks, plunged the most in two years after short seller Meson Capital Partners LLC said it will run out of cash.
Odyssey fell 24 percent to $2.16 at the close in New York, the largest drop since September 2011.
“The purpose of OMEX is to serve as a vehicle for OMEX insiders to live a life of glamor hunting the ocean while disappointed investors foot the bill,” Ryan J. Morris, managing partner at San Francisco-based Meson, said today in a 66-page report, referring to Odyssey by its stock symbol. Meson has a share-price target of zero.
Odyssey has lost an average of $20 million a year for five years and is unlikely to be able to repay its debts, Morris said. Odyssey will be forced to file for bankruptcy protection in six to 12 months if it can’t raise equity, he said.
Odyssey said it has contacted market authorities about the report and is considering legal action against Meson and Morris.
“The text is filled with lies, false statements, and misleading allegations,” Laura Lionetti Barton, an Odyssey spokeswoman, said in an e-mailed statement. “We believe this is a clear attempt to manipulate the market.”
Morris, 29, founded Meson in 2009 as an activist hedge fund that seeks to turn around underperforming companies valued at less than $500 million, he said today by phone.
The Odyssey report is his first as a short seller.
“I’m better known for being an activist on the long side,” he said. “This case is a bit different.”
Short sellers borrow shares to sell with the hope of profiting by buying them back at a cheaper price.
Morris previously led investors in taking over the board of InfuSystems Holdings Inc., which provides pumps used in chemotherapy, replacing the CEO and naming himself chairman. He became chairman of oil explorer Lucas Energy Inc. after Meson gained two seats on the board.
Odyssey had $10 million of revenue and a net loss of $17.9 million in the 12 months through June, according to data compiled by Bloomberg. The company expects gross proceeds of $80 million from silver recovered over the last two years from the Gairsoppa, a World War II shipwreck three miles (4.8 kilometers) beneath the Atlantic Ocean, Odyssey said last week.
Not all of its salvage operations have ended so well. The Spanish government successfully sued Odyssey in the U.S. last year for the return of 17 tons of silver coins that the company recovered from the Nuestra Señora de las Mercedes, a 34-gun frigate that was attacked and sunk by the British navy off the coast of Portugal in 1804.
Meson said new rules by the United Nations Educational, Scientific and Cultural Organization, known as UNESCO, protect national gravesites and heritage, making Odyssey’s shipwreck hunting “unviable.” The report also said Odyssey’s undersea mineral-exploration business is “a pipedream and worth zero.”