Of penny stocks and buried treasure

January 12, 2010

Last Friday bulletin-board traded Marine Exploration announced that it had discovered a shipwreck from 1690 off the coast of the Dominican Republic (ht Ari Weinberg). The company issued a press release trumpeting a “great discovery” and its stock popped 50%. But the release smells fishy…

“The most important find in Dominican waters since the discovery of Captain Kidd’s ship Quedagh Merchant in 2007,” states Wilfredo Feliz, Director of the Dominican Republic Ministry of Culture Sub-aquatic Patrimony Office…

Have there been many “finds” in Dominican waters since 2007?

“Treasure pieces were of incalculable historical value,” according to a news story in Underwater Times.

Incalculable “historical” value, eh? What about monetary value?

Clicking through to the Underwater Times article — no doubt the paper of record on such matters — we find an inventory of what was found: a bell made in 1693; navigation compasses and plumb lines for measuring depth; silver coins, silverware; a pistol, sword sheaths, sword handles and other military items; ornaments and several jewels, notably a ring set with eight diamonds; plates with makers’ marks (castles, lions and fleurs-de-lis); bronze candlesticks; a device for measuring the ship’s speed in knots

Some silver coins and a ring set with 8 diamonds doesn’t sound like much of a haul.

A deeper dive suggests this company isn’t in good shape. They’ve generated $0 dollars of revenue since inception in 2007. They owe $3.4 million. And accounts payable are 3x cash-on-hand. Naturally their auditor — a Mr. Ronald Chadwick based in Aurora, CO — has issued a going concern warning.

The two insiders, Paul Enright and the almost-perfectly-named Robert L. Stevens, have been selling stock non-stop since investing $1 million each in May according to ThomsonOne.

Lots of other fishiness about the company. Their name is plagiarized borrowed from their larger, more successful competitor Odyssey Marine Exploration. Also, as they must be short of treasure maps, they ran a “treasure hunter challenge” on their site. To “win” the competition, entrants would provide map coordinates, which become MEXP’s property upon submission. Winners are entitled to 5% of the recovery value of whatever is found.

One wonders how they maintain a market cap of $20.5 million and whether Stevens and Enright sold a bunch of stock after it popped on the news of this “find.” Not that I’d want SEC to waste their time on this.

The company didn’t return phone calls.

No comments so far

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/