1 Stock I'd Buy Before TMC The Metals Company

The Metals Company (TMC), a deep-sea mining SPAC-listed in 2021, is pre-revenue but has surged ~627% over the past year to a market capitalization of about $3.3 billion as investors eye diversification away from China for critical minerals. By contrast, Kraken Robotics — a Canadian designer of deep-sea batteries and synthetic aperture sonar used in UUVs — reported Q3 revenue of CA$31.3 million, +60% year-over-year, with a 59% gross margin and a 10.5% net income margin, and has secured defense partnerships (including Anduril and the Royal Canadian Navy). Geopolitical pressure to re-shore or diversify mineral supply chains underpins investor interest, making Kraken’s profitable, defense-adjacent technology business a more immediately investable play versus speculative, pre-revenue TMC.

Analysis

Market structure: Winners are specialized deep‑sea tech and defense suppliers (Kraken KRKNF, Anduril partners, select marine contractors) as governments pivot from China for critical minerals; losers are speculative pre‑revenue miners (TMC) and incumbent Chinese processors if policy shifts accelerate. This increases pricing power for high‑spec UUV batteries and SAS providers while physical mineral supply remains constrained for years, likely keeping commodity rallies (Cu, Ni, Co, REE) elevated in 12–36 months.

Risk assessment: Largest tail risks are regulatory prohibition of commercial deep‑sea mining (material negative for TMC, 20–35% near‑term probability in some jurisdictions), export controls on undersea tech (hurts Kraken's addressable market), and failed tech scaling. Expect acute headline volatility in days–weeks around permits/contracts, meaningful business outcomes in 6–24 months, and structural economic implications over 3–7 years.

Trade implications: Direct tactical long on KRKNF (real revenue, 59% gross margin) and defensive exposure to prime contractors/ETF proxies; avoid valuation‑heavy TMC or hedge it with puts/shorts. Use options to express asymmetric views around discrete catalysts (contract awards, permit decisions) and rotate capital from speculative miners into cash‑flowing suppliers and select commodity futures.

Contrarian angles: Consensus overweights narrative that TMC will quickly supply REEs — ignores multi‑year capex, permitting and opex hurdles; Kraken’s margin strength can compress with commoditization or export restrictions. Historical parallels include SPAC‑mining froth and the lithium/glass bubble; unintended consequence: militarization of undersea tech could produce bifurcated winners (defense‑cleared suppliers) and losers (open commercial vendors).

Key Decisions for Investors

• Establish a 2–3% long position in KRKNF (Kraken Robotics) sized to portfolio risk tolerance with a 12–18 month horizon; add if shares dip 10–20% or immediately if a NATO/US contract announcement occurs. Trim to 1% and take profits if position doubles or if quarterly revenue growth falls below 20% YoY.
• Initiate a 1–1.5% short position in TMC (The Metals Company) or buy 6–12 month puts (strike ~20–30% OTM) to hedge speculative exposure; cover on confirmed commercial mining permits or if TMC’s market cap falls >40%.
• Execute a relative‑value pair: long KRKNF 2% vs short TMC 1.5% to exploit fundamentals vs narrative; rebalance if spread narrows by 30% or at 12 months. Use stop losses of 30% on each leg.
• Buy 0.5–1% exposure to copper/nickel via ETFs (COPX, JJG) or futures as inflationary/commodity hedge for 6–24 months—add if prices rise >15% or central bank real yields fall by 50bp, which typically supports base‑metal rallies.
• Use options for catalyst risk: buy 6–12 month call options on defense ETF (ITA) or on liquid contractors (LMT/GD) instead of illiquid KRKNF calls to capture upside from defense spending with capped downside; limit premium risk to <0.5% of portfolio.