“America’s Most Elite Investment Collective Just Netted 67,350% Gains…
“And it’s about to do it again!
“Thanks to a proprietary investment ranking tool, this group has its hands on a game-changing technology…
“And it’s about to take early investors for another ridiculous profit ride
“They’re called the Midas Supergroup…
“And they DO NOT miss.
“When this underground team of elite investment pros decides to take on a project, the results are nothing short of storybook… every single time.”
That’s a solid intro, right? Everyone believes that there are secret cabals who are consistently getting those 50,000% returns, and we just don’t hear about them because they’re so secret and quiet as they bathe in their piles of cool cash. Who can resist?
The spiel is from Nick Hodge, who says this “Midas Supergroup” has “literally never picked a loser” and has generated gains of “19,950%, 49,893%, and, recently, an unbelievable 67,350%” … and, more importantly, he says he has picked out the next stock that will generate massive gains thanks to the backing of this “Supergroup.”
So who is it?
Well, the spiel is about a wireless charging company — a stock that’s seeking what some consider the “holy grail” of consumer electronics: a way to recharge devices through the air, without plugging them in or setting them on a special pad… even, in the most optimistic dreams, from across a room. And we can tell you who that is (you can figure it out yourself this time around as well, I’m sure, and our teaser-chasing reader MRTV has noted the solution for you too in comments this week)… but let’s start with explaining what this “Supergroup” is…
Hodge explains the business this way:
“What it boils down to is this: a comprehensive database that uses complex algorithms to rank companies according to factors like a high CAGR of patent applications, patent novelty, quality, and impact, among other critical pieces of intel.
“It’s dense, complicated, and impossible to understand (unless you have a Ph.D. in mathematics).
“It’s taken over 75,000 man-hours to develop this master system that never sleeps or takes a day off.
“It contains in-depth information regarding 4+ million U.S. patent grants and 2+ million U.S. patent applications…
“It’s constantly running behind the scenes, parsing data on these patents — as well as over 4,000 public and private companies — and continuously updating the internal leaderboard of companies that stand to change the world.
“But most importantly for you, this elite business intelligence is precisely how the Midas Supergroup comes up with its five-digit winners.
“That’s what it takes for the Midas Supergroup to throw its weight behind a company.
“In fact, this system is SO discerning that it’s only led to Midas Supergroup endorsing six companies in its 17-year history.
“And all of them — ALL of them — have delivered massive gains to those who took notice early.
“You’ve already seen for yourself how this uncompromising approach has turned into 19,950%, 49,893%, and even 67,350% returns.”
And he is, in fact, talking about an investment bank with a pretty unique strategy — it seems that the “Midas Supergroup” must be MDB Capital, and they specialize in what they call “public venture financing.” Instead of creating venture capital funds, they help promising patent-rich companies who they think have huge potential become public or uplist from the OTC markets, raise money and raise their profile, and finance the next stage of their (usually still pre-commercial) development. Sometimes they also supply small amounts of bridge financing before the IPO or reverse merger or whatever, or help find other financing like any investment bank would, but they do not themselves have a big balance sheet (they’re a LLC, some of their filings with the SEC are handwritten).
MDB has been the investment bank behind a few names that you may well remember from past teaser campaigns — like Clearsign (CLIR), Second Sight Medical (EYES), Parametric Sound (now Turtle Beach, ticker HEAR), Uni-Pixel (UNXL), Ideal Power (IPWR), VirnetX (VHC) and Medivation (MDVN). I don’t know what MDB Capital’s screening process is really like, or how they try to leverage the patents of their companies to drive value and create something that will appeal to shareholders… but clearly part of what they provide is storytelling, these stocks had (or have) compelling stories that often appeal to investors. And being no dummies, the newsletter teaser writers know that cool “startup” stories don’t just sell stocks, they also sell newsletters.
And yes, some of those stocks have had tremendous returns over relatively short periods of time — though in many (not all) cases those returns were very short-lived and the companies crashed back to earth because the (partly MDB-generated) “bubble” in their share price was pricked after it became clear that the valuation was unsupported by any real business prospects… as with Uni-Pixel and Parametric Sound.
You can see the case studies that MDB provides on their website here, or their investor presentation here… or, if you want what I think might be a more balanced perspective, you might also check out the more cynical assessment of the success of the companies MDB helped to fund in this article from last year.
That doesn’t necessarily mean MDB is terrible, just that they do not have a golden touch when it comes to creating great, sustaining businesses — they might have a golden marketing touch at getting IPOs of teensy weensy companies accepted by investors, and helping to drive them up based on news flow and R&D-type news, I haven’t studied how they work and they don’t publicly release their strategy when it comes to when they invest in the company, when they sell after (or during) the IPO, or the full list of all the companies they’ve funded that haven’t actually made it through to the IPO or other public funding (presumably there are some, I don’t know).
One of the companies teased by Nick Hodge and claimed as a success by MDB that has turned into a real and dramatically successful investment did so years after MDB was involved, apparently — that was Medivation (MDVN), which they took public with a reverse merger and drove to an $800+ million market cap on the strength of a potential Alzheimer’s drug, but it collapsed in 2008 on bad trial results. A couple years after that crash, Medivation did develop and advance another drug that has been much more successful, driving them to a $5+ billion market cap now… but it doesn’t seem as though MDB had anything to do with that. MDB is essentially selling a service (intellectual property consulting and arrangement of financing through public equity or debt markets), and in exchange they receive fees and multi-year warrants from the company. They don’t seem to be investing in the company with their own money, but they are, through the warrants, incentivized to get the stock price higher.
So what’s the company that Hodge is talking about as the latest one “blessed” by MDB Capital?
Well, I suppose I should supply at least a little bit of the hype from the ad for you… don’t want to spoil the fun:
“Considering the ridiculous historical precedent the Midas Supergroup has set, its backing is a strong enough signal to buy in its own right…
“But when you pair this elite endorsement with an unparalleled technology like wireless electricity — one that has consumers going crazy with interest and Big Business licking its lips — it could easily produce gains that eclipse any of its previous endeavors.
“Just like with the Midas Supergroup’s storybook success, words can’t capture the astonishing nature of this technology.
“No more wires, batteries, or electrical outlets necessary. No more forgetting to charge your phone before an important call.
“Take a look for yourself, and bear in mind that this video shows only a small sample of what you can actually do with this revolutionary technology:”
And they embed a video in the ad, which essentially shows a family moving about their house while all of their devices, from watches to video game controllers to tablets and phones, are being constantly charged by a wireless charging network.
But yes, as others have guessed this is, in fact, Energous (WATT), which produced the “conceptual video” that demonstrates “some of the potential.” You can see that video on the Energouos website, as well as their second and third conceptual videos and the demonstrations they did at the Consumer Electronics Show in Las Vegas last month.
It does look pretty cool, to be sure, and Energous has made a little bit of progress in getting partners and raising money — they had a secondary offering with a “real” investment bank (Oppenheimer) late last year, so they have a good pile of cash now for their continued R&D efforts, and they’ve gotten a lot of attention from a group of bloggers over at Seeking Alpha and from Louis Basenese, who touted both Energous and fellow MDB-IPO Resonant as disruptive tech stocks in a CNBC segment late last year (he has touted several of the other MDB Capital-associated companies over the years, using similar language about being “patent-centric,” and also wrote positively about Second Sight late last year after they went public). For more of a long-form look at the technology, there’s an interesting article here from a Forbes contributor last month.
Energous has also joined one of the task forces of a tech standards alliance that is trying to develop unified standards for wireless charging to ensure wide compatibility, though they’re really in a separate, much less developed category of “uncoupled” power (the more advanced stuff are the charging “mats” and similar “immediate proximity but not actually plugged in” chargers, like the Duracell power mats that you can buy now, or the charger that will accompany the Apple Watch). I don’t really understand whether their technology uses WiFi signals or if that’s just a useful way to visualize it for dunderheads like me, but that’s what the demos look like — and the range is more in the Bluetooth neighborhood, with devices having to be within 15-20 feet of a charging station in their demos.
What’s the timeline to commercialization? I have no idea. The stock “sold on the news” after the CES presentation last month, and I think investors probably always understate how long it takes to develop standards, get partners on board, design products, and build an actual ecosystem to support and sell those products — so much of that happens in the labs of a huge company, hidden away in the R&D budget that we never know much about, or is done while venture capitalists have a firm hand on the management and are watching costs and monitoring progress and sweet-talking buyout partners… in cases like this (or Uni-Pixel a couple years ago, for example), where a stock that should be venture-funded and private is publicly traded, all this wooing of partners and rumor-sharing about potential products happens out in the open, drives press releases that move the stock, and it sometimes goes very badly for shareholders when either the technology or the commercialization fail to develop on pace to keep up the interest level in the individual investors who hold shares.
Which doesn’t mean that they won’t get a great, strong partner and turn into the new standard for wireless charging — maybe they will, they are doing something different from the other publicly traded companies in the space (the other companies are mostly using inductive charging, mats and the like, and are in many cases big, established semiconductor firms like On Semi, Broadcom, etc.). We will almost certainly see charging “mats” in widespread use a long time before there’s a viable “central charger” that you can install and charge things over the radiowaves in your home or in your local Starbucks, but I can’t tell you what a “long time” means — just that without any big partners on board yet, the design and production cycle hasn’t really even begun, these are still prototypes. Prototypes that apparently work, per the CES demonstration, but that’s all I can tell you about them.
So, of course, there’s no reasonable way to arrive at a valuation for this company. Right now it’s got a market cap of around $100 million and has something in the neighborhood of $40 million in cash ($20 millionish from their IPO last Spring, $20 millionish from their secondary in December that’s not in the reported earnings yet). They won’t become profitable anytime soon, but they should have enough cash to continue their current pace of spending (about $6 million a quarter) for at least the rest of this year, even if they up their investment a bit. The news flow looks interesting, they have lots of enticing deals and partnerships, but none of it seems to be on any kind of timeline that lets us guess about the financial implications… even if we had any idea of what it would cost to scale up, get partners, or whatever. Really, it’s a bit like biotech — it’s about getting partners, developing the technology, and keeping investors interested and excited about the uniqueness of the potential product… and, most importantly, not running out of money before investors run out of patience.
I’d love to see a product like this — but it will have to be built in to every device that uses it, so this is a massive ecosystem to break into and, to be honest, it probably relies on either Samsung or Apple signing on if it’s going to be a big deal — if you can’t charge your phone, the only device you really care about running out of power in the course of a day, there’s no real need for the product, and if you want to charge your iPhone with this future Energous product, your iPhone is going to have to have a power receive chip in it that works with the Energous “power network.” That’s an exciting opportunity, and also a huge hurdle.
So what do you think — excited about Energous? Think it will either become a huge company in the long run, or be such a good story for a short while that it becomes a spiking thrill-ride of a stock that gives you the chance for great returns? Have a bit more pessimism on this one? I’d love to hear what you think — shout it out with a comment below.