Ocean Power Technologies (OPTT) Soars 50% on PowerBuoy Deployment

Edward Kim  |

Ocean Power Technologies (NASDAQ: OPTT) was among Monday’s biggest market movers, up 50% in frenetic trading of over 17.1 million shares reported, or over 66x the previous three months' average daily volume. Even when you cut that number by 50% to clean up NASDAQ double counting, you're still looking at over 8.5 million shares that changed hands – more than the entire amount of shares outstanding.

The company issued a press release after Friday’s close announcing that it had deployed its PB3 PowerBuoy off the coast of Japan as part of its first lease agreement with Mitsui Engineering & Shipbuilding (Tokyo: 7003; OTC: MIESY). The deployment of the PB3 and its moorings was completed by a joint team of Penta-Ocean Construction (Tokyo: 1893) and Mitsui. Ocean Power Technologies supported Mitsui with the mooring system specifically for the harsh ocean conditions off Kozu-shima Island.

Mr. Toshihiko Maemura, Manager of the Renewable Energy Project Group of Mitsui Engineering & Shipbuilding, stated, “We are pleased to see the excellent progress of this project. Our collaboration with OPT has been exemplary and we are excited to see the PB3 operating well in Japanese waters. We are looking forward to a successful ocean demonstration in order to confirm effect of our resonance control and durability of our mooring system.

The combination of good news plus the significant short position - over 1 million shares as of March 31st - had buyers scrambling for stock well before NASDAQ's open, pushing shares to $3.67 (from Friday's $1.83 close) in the early hours before settling back to a $2.60 - $2.80 range for the rest of the day.

It was a curious time for a press release (the 8-K was timestamped at 5:00pm ET Friday) announcing such positive news, as Friday after the close is often reserved for news that companies would prefer to bury at the bottom of the ocean. The deployment of the PB3 PowerBuoy, however, represents a significant milestone for Ocean Power Technologies, validating the Mitsui agreement that we highlighted last June. We've been following this company extensively at Equities.com since CEO George Kirby came on board in 2015.

Mr. Kirby was previously SVP for the energy business unit at AECOM (NYSE: ACM), where he and his team provided full power generation and power delivery project life-cycle services in the U.S. energy market. Prior to that, he was Vice President of Utility Services at SAIC Energy, Environment & Infrastructure, a unit of SAIC (NYSE: SAIC), working with electric utilities in the North American market. Mr. Kirby also held a variety of management positions at GE Capital and GE Power & Water (NYSE: GE), as well as American Superconductor (NASDAQ: AMSC) and Andrew Corporation, which was later acquired by CommScope (NASDAQ: COMM). He is a registered Professional Engineer (Texas – inactive) and holds eight U.S. and European patents in power generation technology.

The Company

Ocean Power Technologies aspires to transform the world through durable, innovative and cost-effective ocean energy solutions. The PB3 PowerBuoy uses ocean waves to provide clean, reliable and persistent electric power and real-time communications for remote offshore applications in markets such as oil and gas, defense, security, ocean observing and telecommunications.

The company employs 30 people, including an engineering team of 20 individuals, and has a rich intellectual property portfolio of 65 patents awarded and pending.


PB3 PowerBuoy

The PB3 PowerBuoy is a reliable and persistent integrated power and communication platform for remote offshore applications such as subsea and ocean-surface surveillance for security and defense, subsea production operations for oil and gas, and subsea drone docking stations used in the defense and oil and gas markets. Customers can lower operational costs by replacing expensive on-site vessels with a PB3 PowerBuoy, enabling remote offshore subsea monitoring and control from land-based operations. The PB3 can also provide substantial power to remote offshore sites when replacing lower-powered solar and battery buoys, oftentimes enabling real-time operational decision making through cellular or satellite communications which is standard on the PB3.

Ocean Power Technologies is attacking a market whose incumbent solutions such as battery buoys or on-site vessels are severely challenged. They can be expensive, suffer from intermittent and unreliable data collection, lack real-time data transmission, have insufficient power, be limited to single-use applications, have limited data density, have no awareness of failures and have limited or no data processing.

The company believes the total addressable market for its solutions is $8.5 billion.

Source: Ocean Power Technologies Investor Presentation, March 2017

Stock Offering

Investors should note that the company filed 3 weeks ago for a follow-on equity offering of about 4 million shares. The S-1 hit Edgar at 4:48pm ET on Friday, April 7th, and the stock traded down 10% on Monday, April 10th, on the news and had been stuck mostly in a $1.75 - $2.00 range until yesterday's jump. The company's roadshow powerpoint deck was up on Edgar last Friday (we'd like to talk with someone at the company about the merits of Friday afternoon press releases and SEC filings), concurrent with the PB3 press release, so we presume that management is in the midst of investor meetings this week.

The stock is likely capped at these levels as the market waits for the deal to come, and we'll be keeping close watch. One possible scenario we see is that the deal gets priced at a modest discount, and the market takes a couple of days to digest the new shares, providing interested investors who didn't get an allocation on the deal with a logical entry point when the dust settles.


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DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.

Companies

Symbol Name Price Change % Volume
GE General Electric Company 11.52 0.23 2.04 38,251,542 Trade
AMSC American Superconductor Corporation 7.78 0.30 4.01 302,517 Trade
COMM CommScope Holding Company Inc. 14.95 0.33 2.26 3,204,412 Trade
OPTT Ocean Power Technologies Inc. 1.10 -0.16 -12.75 605,480 Trade
SAIC SCIENCE APPLICATIONS INTERNATIONAL CORPORATION 82.50 -0.14 -0.17 212,279 Trade
ACM AECOM 43.19 -0.32 -0.74 943,049 Trade
MIESY Mitsui E&S Holdings Co Ltd ADR 11.09 0.00 0.00 0

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