This is why 1M shares were added to the short position and why it will soon be a VERY good thing for OMEX longs...
From late June through July 15th, the financial stocks were breaking down very hard and it looked like the market was setting-up for a massive decline. Many of the quant funds were looking for companies to short that were likely to need fresh capital (very hard to do during the markets are in crisis) and a mismatch in valuation to fundamentals. OMEX screens very well as a short (if you are an ignorant quant fund that does not know anything about the company). The balance sheet looks weak (notwithstanding the Discovery deal), there is almost zero revenue, the valuation is over $200M, and the company is engaged in litigation with Spain. Many quant funds will identify the candidates from their screens, spend very little time on fundamental analysis and then proceed to short the company. This is what happened with Odyssey and the incremental 1M shares that were shorted
OMEX has several significant catalysts in the near-term and August is the time to own OMEX. 1) Odyssey arrested 2 new sites in the English Channel recently. I would think that we will be hearing about the results of the recovery operations at some point over the next 60 days. 2) The first 2-part portion of the Discovery series is focused on the Black Swan. Indication is that Discovery is targeting a November airing date for the 2-part Black Swan episode and that the regular series will begin in late 1Q08. 3) Spain's response is due on Sept 22. Spain and Goold are going to have a terribly difficult time establishing that a bunch of coins and artifacts that were found 180 miles off the coast of Gibraltar are subject to sovereign immunity under the Law of the Sea Treaty. First....there is no ship that was found and the Law of the Sea Treaty only covers shipwrecks. Second...even if Spain and Goold persuade the court that the coins and artifacts equate to a ship, they have the burden of proof to establish which ship it is. And...most importantly....even if Spain and Goold establish that the ship is the Mercedes, under the Law of the Sea Treaty, in order for a ship to be deemed to be sovereign immunity, it must have been engaged in 100% non-commercial activity at the time of the sinking. Broad evidence exists that the majority of the cargo on the Mercedes was commercial. Checkmate. 4) Odyssey could strike a pre-emptive deal with a country that would cover certain wrecks that Odyssey has found. This would address any questions about title and ownership and Odyssey would move immediately towards monetization.
As noted by others, there are 6.86M shares of OMEX currently short. Many of the short holders are likely “low-conviction” shorts. This means that they have done little fundamental work on the company and that in the face of evidence that they misread the situation, that they will look to quickly cover. Hence, there are 6.86M shares that will have to be bought in very short order in the event that one or more of the above catalysts take place. Much of OMEX’s float is held by high-conviction long institutional holders and insiders. High-conviction long insitutionals are not selling until well over $25. Therefore, this is setting-up for a MASSIVE short squeeze. See you all above $15.....
Okay, now you I think you are really trying to mess with me. Secured loans are not the same thing as borrowing? I should bring this to the attention of my supervisors, considering this is what I do for a living.
<<Less business, less cost and expense and still no profit. Operating expenses are greatly reduced when you have one of your vessels out of service for one whole year. Can you borrow on this business model?>>
Let's see, according to the 10-Q they certainly CAN borrow on this business model. They Why not check out Note G (pg 12) of the statement?
“On February 7, 2008, we entered into a $5 million revolving credit facility with Fifth Third Bank (the “Bank”).”
“During May 2008, we entered into a mortgage loan in the principal amount of $679,000 with The Bank of Tampa to purchase our conservation lab and storage facility.”
Also check out Note M (pg. 15):
“In July 2008, we entered into a Loan Agreement (the “Loan Agreement”) with Fifth Third Bank (the “Bank”). Pursuant to the Loan Agreement, we borrowed $2,580,000.”
Thank you again for showing the short/anti-OMEX crowd’s unwillingness to perform adequate due diligence.
I very much appreciate your analysis. I think it's possible one of these catalysts may occur as soon as Monday with the quarterly update, but in any case I agree this is a great time to own OMEX (as a long).
However, I have been pretty diligent on following this company and have not heard anything about a 2-part special episode on the Black Swan. Is there anything you can point to as evidence of this?