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Ocean Power Technologies Inc (NASDAQ: OPTT) Gives Shareholders A Ride

Ocean Power Technologies Inc (NASDAQ: OPTT) Gives Shareholders A Ride
Written by
Jarrod Wesson
Published on
April 26, 2017
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The common stock of Ocean Power Technologies, Inc. (OPTT) ("Ocean Power "), the provider of cost-effective ocean energy solutions, jumped on April 24, 2017 after the company announced that a PB3 PowerBuoy was deployed off the coast of Kozu-shima Island in Japan as part of its first lease agreement with Mitsui Engineering and Shipbuilding.We covered this company last year in another article. The story now is very different, but we encourage you to read it if you want to learn more about the company. In this article, we will provide information about this new event, and will also show why the share price is low. But, first of all, have a look at the large amount of shares exchanged recently and the share price spike.SourceBusinessOcean Power was founded in 1984 in New Jersey, but it started its operations in 1994 and incorporated in Delaware in 2007. The company develops and commercializes systems that generate energy from the ocean waves. Its product ‘PowerBuoy’, which is "based on modular, ocean-going buoys", was first tested in 1997 and is at the moment being sold. The most important buyers are government agencies interested in the development of renewable energy in their countries. See an image of how the system works:SourceRecent NewsOn April 21, 2017, the company communicated that for the first time and after the signing of a lease agreement with Mitsui Engineering and Shipbuilding, the company had deployed one of its products off the coast of Kozu-shima Island in Japan. George H. Kirby, President and CEO of the company, said the following about the announcement:

“This is an exciting time for OPT as we initiate this lease and deploy the PB3 in Japanese waters for the first time. The deployment went well and the PB3 has already exceeded two thousand Watts of peak power. We’re looking forward to leveraging this opportunity to bring our PowerBuoys to Japan and other parts of East Asia.” Source

Under the agreement with the Asian company, the deployment can take 6 months, but this period can be extended. Additionally, the company said that the system will be monitored with the intention of showing the potential of the system and different applications.Other news that did not have the same impact on the share price, but we considered important, and were released this month as well were: the relocation of its corporate headquarters to Monroe, NJ, which will permit the company to be closer to where its clients are right now. In addition, it was relevant to the announcement of the exhibition that took place in The Offshore Technology Conference (OTC), which was held in Houston, Texas. The fact that the company confirms its presence to this event is important, since the company gets visibility and the chances of obtaining more financing increase. As our subscribers know very well, more visibility results into more liquidity, and more liquidity usually means a higher share price.Financial SituationThe balance sheet of the company shows $7 million in cash and a total amount of assets of $10.3 million:Period Ending4/30/20164/30/20154/30/2014Current AssetsCash And Cash Equivalents7,029.35717,774.29519,983.619Short Term Investments757514,493.881Net Receivables2,537.465185.128346.141Inventory---Other Current Assets116.805186.641568.377Total Current Assets9,758.62718,221.06435,392.018Long Term Investments---Property Plant and Equipment273.049263.898317.513Goodwill---Intangible Assets--828.298Accumulated Amortization---Other Assets319.45385.9241,547.006Deferred Long Term Asset Charges---Total Assets10,351.12618,870.88638,084.835SourceConversely, the amount of liabilities is little, and it does not show long term debt:Current LiabilitiesAccounts Payable3,047.5412,859.9468,141.691Short/Current Long Term Debt81.541100100Other Current Liabilities3,039.1463,039.146992.447Total Current Liabilities6,168.2282,959.9469,234.138Long Term Debt54.56750750Other Liabilities---Deferred Long Term Liability Charges600600600Minority Interest--427.252-374.295Negative Goodwill---Total Liabilities6,822.7953,182.6949,609.843SourceIn addition, the company seems to be undervalued as the book value per share is $1.26, which is half the amount of the current share price. The cash per share is also about that level; $1.81. Taking into account that the company's product is a revolutionary invention that may provide high growth, the share price should be valued, in our opinion, much higher.Institutional Investors and short positionsFund manager seems to believe the same as they have bought shares of the company very recently:HolderSharesDate Reported% OutValueOxford Asset Management101,157Dec 31, 20161.60%298,413Vanguard Group, Inc. (The)69,364Dec 31, 20161.10%204,623Price (T.Rowe) Associates Inc64,200Dec 31, 20161.02%189,390Credit Suisse/53,772Dec 31, 20160.85%158,627Citadel Advisors LLC37,628Dec 31, 20160.60%111,002SourceNovice investors should get to know these funds. Oxford Asset Management, Vanguard Group, Inc. and Price (T.Rowe) Associates are mutual funds. Credit Suisse is a broker and Citadel is a famous quantitative hedge fund.As we claimed in the previous article, the amount of shares shorted is quite large in this stock; 33.51% of the float. This is great news, as if the company delivers news such as the one that we noted in this article, the share price may jump up and we may see a squeeze out. If this happens, long traders could get astonishing returns provoked by the fast closing of short positions.ConclusionOcean Power released very interesting news about a new contract signed in Japan and the market reacted quite favorably. This is what traders could see in the surface, but we made a deeper assessment and realized that the company was undervalued. Finally, the large amount of short sellers could create a squeeze out, which may be very profitable for long investors. We believe the recent pullback is due to the shorts loading up and trying to drive the price back down. To sum up, OPTT is a company that should be on an investor's radar. We will be updating our subscribers as soon as we know more. For the latest updates on OPTT, sign up below!Disclosure: We have no position in OPTT and have not been compensated for this article.

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