A US legal firm specialising in class actions and representing stock holders who claim to have suffered from corporate stock fraud has announced it is to commence an investigation into the controversial Florida based treasure hunting company Odyssey Marine Exploration, relating to potential violations of US Federal Securities Laws. The company undertaking the investigation, Scott and Scott LLP, cite the 23% fall in Odyssey’s share price which occurred in October 2013 following the release of a highly critical report by US based activist investor and acknowledged short trader in Odyssey’s stock, Meson Capital Partners, which amongst other allegations suggested that Odyssey carried $179 million of off balance sheet value in Odyssey’s mining business when the on balance sheet value was zero. Meson was also highly critical of Odyssey’s management and their levels of remuneration relative to the performance of the company stock. Odyssey denied the accusations, but it is understood the Florida based company made no serious attempt to take legal action against Meson in spite of the damage the report apparently caused to the company’s stock value. Odyssey’s share price has been on a downward trajectory since the release of the report and closed on the NASDAQ index on Friday at slightly less than $0.72. A level at which the company risks delisting from the NASDAQ.
Financial experts consulted by thePipeLine suggest that it is unusual for such an investigation to commence so long after a significant fall in a company’s stock price. However, the Scott and Scott investigation is not without danger for OMEX as the case might gain momentum and lead to significant disclosures in the event of any action going forward. It also adds to the uncertainly around the debt burdened company’s future. Experts also point out that the recent takeover of Odyssey by the MINOSA mining subsidiary of Mexican industrial conglomerate Altos Hornos de Mexico, which is due to be voted on by OMEX shareholders in early June, contains a clause which would void the deal if the company loses any class action.
The Scott and Scott investigation will also represent a further embarrassment to the UK Ministry of Defence and in particular Secretary of State for Defence Michael Fallon, a longstanding associate of Lord Lingfield, the Chair of the Maritime Heritage Foundation which manages the wreck site of HMS Victory 1744 and employs Odyssey as its contractor. Lord Lingfield lobbied for Odyssey to be given permission to salvage the wreck site and the eventually gained permission from Mr Fallon in October 2014, only to see permission rescinded in March in the face of a threatened judicial review of the whole permission process.
However, even when faced with the prospect of yet another investigation into its activities, to go along with the seven Parliamentary and Whitehall investigations into Odyssey and its relationship with various British Government departments requested by Labour Defence spokesperson Kevan Jones in January 2015, Odyssey remains sanguine, in public at least. Approached for comment a spokesperson for Odyssey told thePipeLine that the web link “…is intended to generate leads for a law firm and references a 2013 blog that contains significant false and misleading information that was written by an admitted short-seller in Odyssey stock. There is no official investigation and no lawsuit, and Odyssey has not violated any federal securities laws.”