OMEX +.18 TODAY Odyssey Marine Investors Dive For Real Treasure Hunts
By DAVID BENOIT
Of DOW JONES NEWSWIRES
NEW YORK -- Spanish doubloons meant to fund wars, solid gold bars bound for Europe's royalty and bronze cannons that protected it all now sit scattered across the ocean floor from shipwrecks.
But in a new investment plan by Odyssey Marine Exploration Inc. (OMEX), those long-ago sunken treasures could soon be part of investor portfolios. The Tampa company, whose work has been documented on the Discovery Channel and on pages of National Geographic, plans to allow investors a chance to purchase a share of a treasure hunt and split the spoils.
Think of it as a romantic play on all-time highs in gold prices, by tracking Odyssey's ships online instead of tracking price ticks on charts. Or it's a chance to spice up a portfolio by putting down quarterly filings and looking at photos of wreckage.
But know that when the end game is a ship that has been swallowed by the sea for centuries, the risk of coming up empty-handed is high.
"If you are going to be taking the risk anyway, why not go to a business that's potentially going to have high return?" said Chief Executive Greg Stemm. "I could make the case that we've become the best people in the world at finding hard-tofind things at the bottom of the ocean."
Odyssey made its name finding sunken treasure, and now believes it can allow investors to get involved differently. It won't be for every hunt, but for a few each year, Odyssey would raise the special funding to look for what it estimates are 100 wrecks worth $50 million. Odyssey says the time at sea costs about $3.6 million, plus other costs, so a target, if found, could bear big return.
The opportunity won't be available to just anyone. Odyssey is unable to give specifics, but anticipates the vehicles being open to "accredited investors." The Securities and Exchange Commission defines that as someone with a net worth over $1 million or who makes over $200,000 a year.
Odyssey has already tested a similar plan in the U.K., where about 100 clients of London-based investment consultancy Robert Fraser & Partners have sunk $11.7 million to fund four treasure hunts. Odyssey might have found at least one target for Robert Fraser, though it is too early to be certain.
Robert Fraser Chairman Colin Emson said it isn't for everyone and the company only hunts when the anticipated profit is 10 times costs.
"It is the most fascinating subject in the world," he said.
It might become more intriguing if gold prices keep soaring. David Beahm, vice president of rare-coins and gold dealer Blanchard & Co., said rare coins trade higher than gold bullion. He doesn't recommend the investment, but did acknowledge, "As a child, you always want to find the buried treasure."
Gold recently traded at $1,374.90 per troy ounce on the Comex division of the New York Mercantile Exchange, and earlier this month hit a record of $1,424.50.
Now, American investors will get a crack at some 6,000 shipwrecks Odyssey's researchers have identified while scouring old shipping records and newspapers. The process for selection is strict and tailored to Odyssey's expertise.
Research must produce a specific 300-square mile spot in deep water, where few others can look. There must also be proof that Odyssey wouldn't face a legal battle over ownership, a scenario currently holding up the windfall from one of the richest sunken treasure finds in history.
In 2007, Odyssey pulled more than 17 tons of silver coins from a Colonial-era site code-named Black Swan. But the riches, estimated around $500 million, remain in a vault as Odyssey fights a bitter court battle with Spain over ownership.
Using a fleet of vessels loaded with deep-diving robots and specialty cameras, Odyssey has the Black Swan and several other trophies it can point to as evidence it can find treasures.
Last year it found the HMS Victory, which sunk in 1744 and had been one of England's great maritime mysteries. In 2003, Odyssey discovered the SS Republic, a Civil War-era steamship that sank off of Georgia loaded with gold and silver worth around $75 million today.
The first expedition for Robert Fraser investors was code-named "Enigma." Odyssey was paid $3.5 million for the search and the research file. From any recovery, Odyssey would get 80% of the first portion of sales until it had $20 million. Proceeds from the remainder of the booty would be split equally with investors.
Contracts, tailored to risk and the target, would vary for each hunt.
Mark Gordon, Odyssey's chief operating officer, said opening up hunts to U.S. investors could allow Odyssey to hunt 10 times a year instead of six. They search about 90 to 120 days, for about $30,000 a day in costs.
Still, the investment carries high risk. Robert Fraser's website warns potential investors of "often total loss" while touting the high return.
Odyssey will also have to consider taxes, a somewhat murky issue that could carry implications for the final payouts to investors. But, despite the potential complications and risks, there are other perks.
"You have an investment you can talk to your buddies at the bar about," said Gordon.
AI
