The Business Journal - Tampa Bay
From the February 23, 2001 print edition
By Jane Meinhardt, Staff Writer

TAMPA -- Unlocking the secrets of the deep is a business frontier far from the arcane world of outsourcing employee benefits.

To James MacDougald, it is a fascinating frontier with great promise -- enough for him to bank millions on Odyssey Marine Exploration Inc. in Tampa.

The St. Petersburg resident founded ABR Information Services and sold it in 1999 to Ceridian Benefits Services for $750 million. MacDougald, 57, retired from Ceridian last year, but remains active in various business ventures.

Odyssey Marine attracted his attention because, like ABR was initially, it is a niche business. MacDougald recently invested $3 million in Odyssey. He is now the major stockholder in the public company and chairman of the board.

Before investing, he read books, reviewed old charts in his personal collection, checked out Odyssey's background and went to Underwater Intervention 2001, a deep-sea research and recovery conference.

"I found that the business of marine exploration is ripe for some new niche opportunities," MacDougald said. "Odyssey is taking technology and applying it to a niche, to identifying shipwrecks. Odyssey is at the leading edge of that technology."

The cultural and archeological discoveries in deep-ocean shipwrecks are as important to MacDougald as the potential to recover millions in valuables such as coins.

"It's an unusual business in that it has no revenues until it makes a significant find," he said. "It takes a special type of person to be willing to do that. It's only a question of time for Odyssey because they have an absolute commitment and will always find a way to use the latest technology."

Odyssey specializes in exploring with robotics, focusing on searches 1,000 to 6,000 feet deep. The company has seven full-time employees and hires about 30 people for on-the-water exploration.

Odyssey has incurred net losses of $5.95 million, according to a Jan. 11 Securities and Exchange Commission filing.

The filing goes on to say that the company expects to derive substantially all of its revenue through the sale and/or display of the shipwreck cargoes and artifacts, including replicas and general shipwreck merchandise. Therefore, until the company is successful in locating, recovering and marketing artifacts and/or cargoes, it will be dependent upon investment capital to meet its financial requirements.

During the current fiscal year, the company anticipates spending approximately $60,000 per month to pay for administrative and general office expenses, project development, and marketing and promotion. In order to pay these expenses, the company intends to raise cash through the sale of marketable securities and through the sale of equity, debt or revenue participation on one or more of its projects.

The way to tell if a business such as Odyssey is a good investment is to determine what the market is for what the company finds or intends to sell or by the way it intends to make a profit, said Geoffrey A. Simon, senior vice president of investments with Robert W. Baird & Co. in Tampa.

"It's hard to figure what it takes for a company like this to make money, but they seem to have been at this a long time, have a lot of experience and are very committed. They may have everything it takes to be successful. They may have knowledge that makes it a good investment," said Simon.

Of the company's shipwreck exploration projects, the "Cambridge" holds the most potential because most of the project's research and search has been done, MacDougald said. The Cambridge is Odyssey's name for a British warship that sank in the late 1600s in the Mediterranean.

Odyssey's research shows the ship carried coins with an estimated numismatic value of $200 million to a billion dollars, according to Greg Stemm, who, with John Morris, founded the business in 1986 in Colorado.

The company plans to resume the Cambridge project in April and will spend two months in the Mediterranean in an operation that will cost about $10,000 a day. MacDougald's investment provides more time over the target, Stemm said.

The company will use new equipment that explores magnetically as well as acoustically, helping to differentiate between deep-sea geological formations and shipwrecks.

"This dramatically shortens the search and recovery phase," Stemm said. "We'll have completely searched the area in which research indicates the ship sank."

The business follows two shipwreck exploration rules: Prove there is sufficient value to justify the cost and make sure Odyssey has the rights to keep what is recovered.

"We assume it's likely that every shipwreck has at least one claimant so we make sure we deal with them," Stemm said. "We have a litigation avoidance strategy."

Odyssey partners with the archeological community and governments in its explorations, he said. The company also helps governments manage their underwater heritage and develops protocols for shipwreck exploration.

"It has been a wild West in international waters," Stemm said. "We made a decision to go down the archeological path and work with governments, not fight them."

Some spin-off businesses Odyssey is considering include shipwreck tourism, television production and documentation and archeological contracting.

The company is counting on MacDougald's proven business acumen in making strategic decisions. His willingness to invest also helps raise capital for Odyssey.

"I think investment banking firms will go whoa, he sees something here," Stemm said.

To reach Jane Meinhardt, call (727) 507-0663, or send your e-mail to jmeinhardt@bizjournals.com.