In tracking the land-based salmon farming sector's rapid rise over the past several years, we sometimes have found ourselves in a conundrum.
Here's the pattern: An unknown company issues a gushing release about a new land-based salmon operation, with outlandish projections of production, the expected size of the project, and the eager market ready to pay a premium for locally grown fish.
Exciting stuff, and we know our readers want to keep on top of any and all developments that matter in the seafood sector.
But separating the talkers from the doers isn't easy. As my colleague Anders Furuset put it to me: "Some of these projects are just a guy with a cell phone."
Some of these projects are just a guy with a cell phone
As we've noted before, Atlantic Sapphire is now worth $1 billion on the stock exchange (it was at $800 million when the article was written).
That's a high figure for a company that's shown nothing but losses, minimal revenue, and -- most importantly -- hasn't proved its ambitious new project can deliver a product people want to eat.
Mind you, the share price of the company isn't fully within the company's control. It can only make projections based on what it knows and believes, signal to the market when milestones are met, and continue to lay out its case for why it's a risk worth taking.
But the valuation of the company is a reflection of the exuberance among investors, and safe to say that exuberance is significant.
What's the downside?
While Atlantic Sapphire has the benefit of experience with the technology, the talent pool for expertise in the recirculating aquaculture system (RAS) world is incredibly small.
That's no small risk: without educated people to run these operations, things can go very wrong, and time and again, executives have highlighted both publicly and privately that there simply is not enough knowledge out there to support all of these projects.
And knowledge is what is required to attack land-based aquaculture's very real challenges.
IntraFish reporter Rachel Sapin's piece, "Land-based salmon farming's dirty little secret," which discussed the problem of off-flavor in RAS-produced fish, had some RAS producers up in arms and accusing us of scare-mongering.
The truth is, if you don't have expertise to solve that one "small" problem, it isn't solved. You can have 500,000 metric tons of fish sold not at a premium, but at a loss.
There are plenty of other pitfalls that get drowned out among the scramble for promotion. Read the fine print.
Don't take it from me
If you've been doing your homework, you should be aware that a lot of smart people are raising caution flags.
Geir Myre, global head of aquaculture at insurance giant AXA XL Catin, dubbed recirculating aquaculture systems (RAS) "very much a loss business," and said far too many claims have come from unknown causes.
Ragnar Nystoyl of Kontali said US projections for land-based salmon by 2030 -- 300,000 metric tons -- would be an unlikely "double jackpot." Instead, a more sober view would put it at 100,000 metric tons. So somebody is hugely missing targets (or going out of business) in that calculation.
Morten Nielsen, who heads up land-based aquaculture for Akva Group in Norway -- one of the world's largest suppliers of land-based aquaculture systems -- recently presented a report highlighting 69 different land-based aquaculture projects, adding that no more than five are likely to be built.
The head of US land-based salmon farming operation Nordic Aquafarms, Erik Heim, has cautioned against the over-exuberance.
"Most RAS startup cases in the United States have not had a strong financial foundation, have lacked scale and do not have an established industry to recruit from," he noted in a comment to IntraFish. "That increases risk and makes profitability difficult."
And let's not forget -- even the company with the most financing, the most experience and, at this stage, the most likelihood of success, has experienced how quickly a problem can wipe out an operation.
In June 2017, just before its Oslo IPO, Atlantic Sapphire lost its entire stock in Denmark in a period of under 30 hours. Again, they're the guys that, if you believe the market watchers, have the most chance of success.
While there's reason to be optimistic about land-based salmon farming in the long-run, investors shouldn't kid themselves: they're placing an incredibly risky bet.
Smart money goes somewhere else, but if you're ready for the exhilaration of pioneering the growth of a sector -- and willing to risk millions doing it -- land-based salmon farming might be perfect for you.