The Contracts That Have Lead To Ocean Power's Massive 400% Rally May Surprise You

Ocean Power Technologies Inc OPTT shares are up more than 400 percent from their May lows as the company has secured a pair of new contracts.

The wave power technology company’s market cap has risen by about $20 million in the past six months. However, a look at the contract numbers reveals that they are relatively modest in size.

The company completed its first commercial PB3 agreement with Mitsui Engineering and Shipbuilding worth about $975,000. In addition, Ocean Power secured a new contract with the U.S. Department of Defense Office of Naval Research worth $250,000.

Together, those two new contracts are worth just over $1.2 million, a far cry from the $20 million in market cap Ocean Power has added this year.

What’s going on?

The most likely explanation is that the value of the new contracts doesn't mean as much to investors as the fact that the company’s PB3 product is drawing commercial interest. The Navy and Mitsui clearly see enough potential in PB3 technology to take a gamble on Ocean Power, and that vote of confidence is enough for speculative investors to take a gamble as well.

In other words, it’s not the value of Ocean Power’s recent contracts that is moving the share price. It’s what those contracts say about the potential of PB3 down the road.

Despite the recent surge, Ocean Power’s stock remains down 74.6 percent in the past five years.