People sink (heh) incredible amounts of money into expeditions to recover precious cargo from sunken ships. It’s a breathtakingly bad investment write Peter B. Campbell & Rodrigo Pacheco-Ruiz:

• Investors are convinced to fund such expeditions due to incredible estimates of the potential wealth in the cargo hold of a sunken ship.
• However these estimates are almost always wildly exaggerated. One ship’s treasure was meant to be worth $400 million. To date as little as $13 million has been extracted.
• Moreover the first coin found on a wrecked ship might be worth a lot of money. If there are 50,000 of those coins then it quickly becomes a flooded market and each coin is worth little.
• This helps explain why the shares of companies that specialize in treasure hunting usually trade for mere pennies.
• It is also indicative that mineral extraction companies who are experts at deep water operations have never tried their hand at salvaging lost artifacts.
• The business is only going to get harder. The 2001 UNESCO convention protects any shipwrecks over 100 years old and governments have independently been cracking down on the activity.

Read more about treasure hunting, some famous wrecks that have come to disappoint, the one treasure hunting company that still does alright, and more over here.

Source: Bloomberg