Treasure Hunters Pursue U.S. Investors Seeking Golden Adventures

[As an aside, I bought a few shares of Odyssey Marine a couple of years ago, when shares were $5 each. Now they're down to a dollar!]

Treasure Hunters Pursue U.S. Investors Seeking Golden Adventures
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., those long-ago sunken treasures could soon be part of investor portfolios. The Tampa, Fla., company, whose work has been documented on the Discovery Channel and on the pages of National Geographic, plans to allow investors a chance to purchase a share of a treasure hunt and split the spoils.

View Full Image

Odyssey Marine Exploration

Odyssey prides itself on finding shipwrecks. Above, the company pulled a canon in 2008 from HMS Victory's watery grave in the English Channel.
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 is a chance to spice up a portfolio by putting down quarterly filings and looking at photos of wreckage.

Treasure hunting might become more intriguing if gold prices keep soaring. David Beahm, vice president of Blanchard & Co., a dealer of rare coins and gold, 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 on Friday closed at $1,362.20 a troy ounce on the Comex division of the New York Mercantile Exchange, and hit a record of $1,424.50 in early November.

To be sure, 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-to-find things at the bottom of the ocean."

View Full Image

Odyssey Marine Exploration Inc.

Chief Executive Greg Stemm, right
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 at least $50 million. Odyssey says the time at sea costs about $3.6 million, plus other costs, so a target, if found, could bear a big return.

The opportunity won't be available to just anyone. Odyssey is unable to give specifics, but the firm 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 put in $11.7 million to fund four treasure hunts. The process works like this: Robert Fraser buys the right to the shipwreck, the research file and the data behind it, and then contracts Odyssey to find it, bring it up and sell it.

Odyssey might have found at least one target for Robert Fraser Marine, the firm's division for treasure hunting. However, it is too soon to fully identify the find and the firm is reluctant to announce the names of ships until it is 100% certain.

Robert Fraser Chairman Colin Emson said treasure hunting isn't for everyone and his firm hunts only when the anticipated profit is 10 times costs. "It is the most fascinating subject in the world," he said.

Now, American investors will get a crack at some 6,000 shipwrecks that 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 also must 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 recovered 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 in court 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 rest 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 or more 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 also will 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," Mr. Gordon said.