TMC Submits First NOAA Permit Application, DeepValue Report Maintains Sell Rating Amid Risks

What happened

TMC, a pre-revenue deep-sea mining company, is advancing its regulatory strategy under the U.S. Deep Seabed Hard Mineral Resources Act. A Motley Fool article reports that TMC recently became the first to submit an application under NOAA's newly consolidated deep-seabed mining permit process, marking a procedural milestone. However, the latest DeepValue master report rates TMC as a POTENTIAL SELL, with a conviction of 4.0, due to untested permitting regimes, heavy structural encumbrances like a $145 million royalty liability, and negative equity of -$40.6 million. The report's base scenario, with a 45% probability and $7.00 implied value, assumes regulators engage procedurally but avoid fast decisions, while downside risks include permit delays and dilutive equity raises. This application does not alter the core investment thesis, as it remains a high-risk, speculative bet dependent on uncertain regulatory and financial outcomes.

Implication

Investors should interpret this submission as early-stage progress within a complex regulatory framework, not a breakthrough that mitigates fundamental risks. The DeepValue report's base scenario already accounts for such engagement, with a 45% probability of slow approvals and no commercial permit by 2027. Downside scenarios, like NOAA rejections or dilutive equity issuances, could drive the stock toward the bear case of $3.50, outweighing near-term upside. Key monitoring points include NOAA's certification decisions and binding agreements with partners like Korea Zinc, which remain unsecured. Thus, maintaining a cautious approach and considering exposure reduction above $9.50, as per the report's trim level, is advisable until clearer milestones emerge.

Thesis delta

The submission of the NOAA application aligns with the DeepValue report's base scenario, where procedural engagement occurs without fast approvals, so it does not materially shift the investment thesis. Key risks—regulatory uncertainty, financial encumbrances, and reliance on future capital raises—remain unchanged, and the application is a routine step in a high-stakes process. However, it provides a slight positive catalyst for sentiment, but fundamental concerns persist, reinforcing the recommendation to avoid adding new capital and trim on strength.