Ocean Power Technologies (OPTT): Expanded SEC Probe, Promotions, Revenue Decline
Ocean Power Technologies (
OPTT
) is creating waves alright ... just not the right kind.
Over 32 years, the company has failed to turn electricity-generating ocean wave power into a real business.
But the company has created waves over the years by recycling old "news." All backed by a veritable brigade of promoters eager to push the old news and thus keep the company on investors' radar.
Meanwhile, Ocean Power has failed to turn out a commercial product while racking up over
$177 million
in losses.
Yet the stock recently lifted off and floated to price levels not seen in over a year.
TheStreetSweeper alerts investors about what's really behind this rally ... and why the stock is precariously positioned to sink into the deep blue sea.
First, the executive bullet points:
*SEC investigation expands
*No cash set aside for SEC investigation losses
*Regurgitated news
*Oddly timed stock promotions
*Losses rising
*Nearly $1 million cash burn monthly
(Source: Ocean Power website )
Ocean Power’s powerbuoys are designed to rise and fall with the waves, converting mechanical energy into electricity that underwater cables send to shore.
Investors may find other viewpoints here . Meanwhile, below are TheStreetSweeper's details surrounding Ocean Power's stormy seas:
*1. Agreement: Just Rehash
On June 1 , the stock shot up some 300 percent on a company press release announcing Ocean Power's lease agreement with Mitsui for a power buoy "planned to be deployed off Kozu-island..."
(Source: Yahoo Finance , TheStreetSweeper)
All well and good, right? Except that Mitsui deal is not new. The companies began working together eight years ago .
But in October 2013 , Ocean Power reeled out a strikingly similar press release which said the company agreed with Mitsui "to cooperate in the development and commercialization" of the power buoy.
In April 2014, TheStreetSweeper exposed Ocean Power's habit of recycling old news. For example, in 2012, the company announced it clinched a deal with Lockheed Martin for a demonstration project in Australia. here .
That worked so well, it spun out the same news two years later here . The company didn’t even bother to change many words. A few months after our investigation, the former CEO was fired and a class action suit was filed claiming securities violations related to public statements. The lawsuit is in settlement stages now.
And guess what? The deal fell dead in the water in 2014.
*2. Amazing: Pitiful Sum, Many Years In The Making
One thing about the recent, much-trumpeted Mitsui deal is amazing. It has taken Ocean Power three years to progress from agreeing, to agreeing some more and planning to deploy a power buoy. All that time and effort for an engineering services and licensing contract expected to be worth only $975,587 over half a year or so...
Mitsui apparently considers this arrangement no more than a science experiment; the Mitsui website doesn't even mention Ocean Power and its ballyhooed agreement.
(Source: Mitsui Engineering and Shipbuilding )
Alarmingly, Mitsui's sub-million-dollar contract is Ocean Power's " one revenue producing contract ."
Lately, Ocean Power has needed to lean heavily on its one viable deal...
*3. Critical Timing: July 14 Press Release
Ocean Power's July 14 press release should have been considered skeptically.
You see, the very next day, the company was scheduled to release its fiscal year financial report. And that report was filled with shockers.
The morning of July 14, the company
announced
deployment of "an anticipated commercial" power buoy off the New Jersey coast. “We
are delighted to announce that we now have two PB3 PowerBuoys deployed
off of the coast of New Jersey, with one of them being our anticipated
commercial PB3 product offering," stated CEO George H. Kirby.
Cheerleaders
with bubble machines and pompons lined up on Twitter and elsewhere. And
the stock ....ah, that stock went crazy, rising more than a buck
immediately.
The stock levitated over $10 per share the next day - - before the report was posted late Friday, July 15.
Our chart (attached) indicates how the stock zig-zagged, based on critically timed news.
(Source: Yahoo Finance )
In after-hours trading the stock tumbled in reaction to the bad financial report, closing down at $6.39 on July 18. The reaction was strong yet more subdued than deserved. The stock would have tanked if the market had understood the massive issues buried in Ocean Power's financial report ...
*4. SEC: Investigation Expands
The July 15th financial report for the year ended April 30, 2016 - is full of stomach-churning twists and turns:
* The Securities and Exchange Commission expands Ocean Power investigation.
The SEC has expanded its ongoing investigation with the issuance of a second subpoena on July 12 , 2016. This one focuses on Ocean Power's April 2014 public stock offering.
The commission opened the investigation early last year with a subpoena related to "public disclosures" involving the company's Australian demonstration project. As we mentioned that deal is now defunct.
* No cash reserves have been set aside for losses resulting from the investigation.
*Cash burn rate is ~$900,000 per month.
*Just $6.8 million cash left on April 30.
*Revenue drops 82% ... to less than $705,000.
*Operating losses expand.
*Actively looking for funding.
A few days later, July 22, the habitual stock issuer announced it would sell 595,000 shares and warrants at a desperate $6.75 per unit - well below the then-$9-plus stock price. This funding produced just about $3.6 million - just a little more than one quarter's worth of cash.
So how on earth do we account for the more recent stock hops?
Ah, that's where a bucket brigade of promoters steps up...
*5. Hmmm: Pirates And Sharks?
Despite Ocean Power's terrible earnings and SEC investigation expansion, the stock regained its footing after a hearty band of swashbuckling stock promoters launched a big email campaign:
(Source: Yahoo Finance )
Promotions include:
(Source: stockpromoters )
Here's one knee-slapping pitch emailed to subscribers:
- OPTT from which offered us a huge profit opportunity at the start of June was back in play again starting on Thursday, July 14th. We were on the ticker in the low $3s when news hit in the pre market that day. OPTT started to take off later that afternoon hitting a high of $5.63/share. Then on Friday, July 15th, thanks to strong earnings, OPTT got silly hitting a high of $10.10/share. ..
Recall that the so-called strong earnings report included a larger loss than the previous year, 82% less revenue and an SEC subpoena.
Since 2011, Ocean Power has been the subject of a staggering 34 organized promotional campaigns.
Solid companies with good prospects don't need or want such blatant promotions.
*6. "Show Me The Money:" Check Executives' Wallets
Just about now, investors may be ready to temple their fingers and growl, "Show me the money!"
The money's there alright... thanks to stock offerings. But much of it is going to executives.
(Source: Company SEC filings )
The three top executives made $1.2 million ... Close to double the total fiscal years' revenue! So, if Ocean Power expects to do anything but pay executives, another stock offering brimming with dilution may be looming.
In fact, it seems like the company has gotten so hopeless or hopelessly boring ...
*7. Big Banks, Analysts: ZZZ-ZZZ-ZZZ
Institutions and analysts have no interest in Ocean Power.
The snippet below, from the July fiscal earnings call, indicates even the institution that handled the company's last few stock deals, Roth Capital Partners, didn't bother to comment . Who knows if Roth even listened in?:
(Source: Seeking Alpha )
In fact, no one has asked questions during a conference call since July 2015 . And no analysts have cared enough lately to write a price target or earnings projection ( here ).
As shown below, this company attracts virtually no institutional ownership.
(Source: Nasdaq )
*Conclusion
Ocean Power is a pitiful "story" company with no viable commercial product, drowning in stock offerings ... and doomed to try to survive just a little longer by churning out the same old news and getting promoted by the same old professional promoters.
History dictates that these desperate, promoted stocks go off the deep end once their miserable condition is exposed. Investors just finally get fed up. So TheStreetSweeper is alerting investors that a massive 65% plunge appears imminent for this stock.
* Important Disclosure: The owners of TheStreetSweeper hold a short position in OPTT and stand to profit on any future declines in the stock price.
- Editor's Note: As a matter of policy, TheStreetSweeper prohibits members of its editorial team from taking financial positions in the companies that they cover. To contact Sonya Colberg, the author of this story, please send an email to scolberg@thestreetsweeper.org .