I’ll let you know up front that this is not a particularly “secret” stock reveal today — yes, Frank Curzio is hinting at a stock to promote his entry-level newsletter (Curzio Research Opportunities, currently $49), but you could find this stock on your own. Anyone could, that’s the nature of a unique product.
But I’ve been seeing the ads from Curzio for about a month now, and the questions are still piling up… and I’ve been thinking about the stock myself, so I thought I should do my thinking out loud for you, dear reader. Ready?
The ads mostly feature Frank Curzio “getting shot” — he went to NY to meet with management and see a demonstration of the device, and apparently he volunteered to test it out himself… so that video, really, was all anyone needed to ID the company.
But we’ll see what other clues and numbers he drops, just to make sure we’re being thorough.
They’re testing a bunch of different phrases with the emails leading to this ad to see what works best (“Space Age Police Device Has Me Seeing $$$,” ” CAUGHT ON TAPE: Frank ‘Frozen’ by Space Age Device”), but this is my favorite:
“Recently, Frank flew to New York City on his most incredible venture yet.
“He stood in front of a man holding a Space Age-style weapon…
“What some in the media are calling a “Batman gun”…
“And asked to be shot – right in the chest.
“You won’t believe what happened next.”Are you getting our free Daily Update
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And the big market opportunity they hint at, of course, is that this company will be the “next Taser” and will sell this device to all the cops in the world over the next few years.
That would certainly be a worthy investment if it works out — I don’t know what the odds of success are, that is the major unknown factor as the very first pilot programs test the device and it begins to be used on the street, but following in the footsteps of Taser would certainly make investors drool… Taser changed its name to Axon Enterprises recently, mostly to reflect the fact that their business has expanded to be perhaps more dependent on police cameras and their “evidence cloud” that stores video from those cameras, but most of the gain until recently came on the back of their “less lethal” Taser device that is meant to incapacitate people with a relatively small (compared to a handgun) chance of death or permanent injury.
This is what Taser/Axon stock has looked like since they began trading (they went public in 2001, the original Taser was released in 1976 but used gunpowder and was classified as a firearm and didn’t sell much — the first air-propelled Taser came out in 1994, and the first one to really get wide police interest came out in 1999):
So that’s almost certainly what has Frank Curzio seeing dollar signs with this one — the potential that maybe the stock could follow on Axon’s footsteps. Do note that this is a lot easier in retrospect — those huge spikes come with a back-end collapse, so if you held Axon through to today you would be quite happy… but you would have also sat through several periods when your investment collapsed in value by 60-80%. Not many people can handle that. Even in that period of the chart that now looks flat by comparison, from 2001-2003 or so when they were just ramping up sales, the stock doubled in less than a year and then gave up more than those gains just as quickly and turned to a loss… we can’t know what will happen with this “secret” stock, of course, but be aware that extreme volatility is likely, and that means dramatic news-driven moves both up and down.
So that’s me setting the table with the major comparison that Frank is hoping will be relevant. What does the ad actually say? Here are some snippets and clues that set up the market opportunity…
“Tasers have a huge flaw.
“An open secret no one really wanted to talk about… until now.
“They’re not always safe.
“Think about it – you’re shooting 50,000 volts of electricity into someone.
“Most people don’t know this… but since the company went public… more than 1,000 people have died after an altercation involving a Taser.”
“… according to a 2016 LA Times report, Tasers were able to subdue a suspect only half the time the LAPD used them.
“Cops are becoming more wary of using them….
“We need something better.
“We need something that saves lives!
“I believe this device is the answer.”
So Frank went to NY to shoot his promo, and got Bo Dietl and “Chief Don” and some other police folks to speak with him about the device… which means he was clearly working with the company’s promotional folks — Dietl is a substantial shareholder, and the “Chief Don” that Curzio also spoke with is Don De Lucca, the company’s Chief Strategy Officer. He also includes quotes that the company has gathered from lots of other police representatives along the lines of “this is going to save lives” and “it’s obviously a safe alternative,” so there’s clearly some acceptance of the idea already — how much of it will take hold and lead to real sales and “a device on every cop’s hip” is very much an open question, but it at least has potential.
And one of the more interesting things is this quote from Scot Cohen, the Executive Chairman…
“I’ve never seen a product where you don’t have to spend for marketing. It’s just coming to us. The media, we’ve been picked up by 60 or so stations, we’ve been printed all over the police rags, both domestic and international, and we’ve made national news online and in print. We haven’t paid for a dime.”
So it’s undoubtedly quite early — they are still training their first departments, and they don’t really have any sales or revenue yet.
More from the ad:
“… this company only listed on the NASDAQ in December 2018.
“It’s still small, virtually unknown to the general public, and is only – just now – starting to gain traction….
“This incredible new device could easily replace Taser as the #1 tool for law enforcement officers.
“And that’s not just my opinion.
“Cops, community leaders, activists – on both sides of the aisle… they say the same thing.”
And then the part that I think provides some real rollout potential…
“… the co-founder of Taser… recently signed on as the president of this tiny company…
“And went on-air saying he plans to use the exact same rollout strategy.”
And a little dreaming about the market potential:
“Right now, these devices sell for about $800.
“There are a little over 12 million cops in the world.
“You can do the math.
“We’re talking about potential sales in the billions of dollars.”
So yes, this is certainly an easy ID — don’t need the Thinkolator, and barely even need a few seconds on Google, so I imagine you already know the name… but in case you didn’t bother to figure it out, this is little Wrap Technologies (WRTC), makeer of the BolaWrap.
And though the device is new and does not have any traction yet in financial terms (they had only about $100,000 in revenue in the first quarter, which was their first quarter with any measurable revenue at all), it has been around for more than a year as they try to build a market for the product.
The BolaWrap uses a 9mm cartridge with a small amount of gunpowder to propel a kevlar bola — not unlike the strings with weighted balls on the end that early hunters would use to take down deer or buffalo, only instead of weights it uses propulsion to wrap around people who are within 25 feet or so, and has little barbs on the end of the wrap, like small fishhooks, to stick to the target as it tangles peoples arms to their body or their legs together.
I think we aren’t yet clear on exactly what the best use will be, but the device has now been used “in the field” at least once — to subdue someone who had apparently left his house willingly after being barricaded in by SWAT. It seems that they’re pushing for it to be an “early intervention” to incapacitate people so that police officers can move in with much less risk — particularly for people who might be mentally ill, which is a major area of concern for police right now, or unpredictable but not so dangerous that they need to be tasered or shot or even dosed with pepper spray.
Frank was an earlier shareholder in Wrap, he bought in one of their private placements and his shares were registered to sell in their first S-1 filings back in November, though I don’t know if he actually sold any. Given his enthusiasm for the stock I assume he still holds both the shares and the warrants, but I don’t know.
Wrap went public using a reverse merger late in 2017 and traded OTC for most of last year, so that’s why you see the share price chart going back a while, but they actually got “uplisted” on the Nasdaq about six months ago, in December. That gives them a much larger platform for future fundraising, which will certainly be needed if they’re going to dramatically ramp up production and marketing (though if things don’t ramp up, at the current spending rate, the $10 million or so they currently have should last them a few more quarters). Here’s what the shares have looked like since they started trading:
So no one is entirely clear on what the price should be, since the stock is entirely a story right now and has no real financial performance yet. You can’t make a real fundamental argument for whether the company should be worth $20 million or $200 million or $2 billion at this point (it’s valued at just under $200 million right now), what we have at the moment is really just investors placing bets on whether they will be able to roll this out to a large customer base of police departments, and if they can, on how quickly.
Wrap Technologies doesn’t know how fast the takeup will be either, of course, but they are absolutely modeling themselves on Taser — and they did hire Tom Smith, one of the Taser co-founders who had spent the past several years trying to build up a hard-plate armor company for police (Achilles Technology Solutions — that company seems to no longer exist, not sure why). Smith is certainly a key hire because of his role in building up the sales force for Taser and expanding sales through distributors and internationally, and they are explicitly trying to follow that same strategy with Wrap Technologies… that doesn’t mean it will work, but they do have a strategy that has worked before, with a similar product that will require a lot of training and gradual marketplace acceptance if it’s going to become a success.
The rosy scenario essentially just mimics the early years of Taser rollout — they say they have more than 1,500 police departments and other agencies who have requested demos or purchases (2/3 in the US), and the assumption is that the orders build up pretty quickly as pilot projects come online. Here’s the chart from their investor presentation that models how it will work if they have a rollout that is the same as Taser in terms of volume of devices sold in the first few years of commercialization:
That’s obviously just a guess, but it would mean that the stock today is trading at about 17X the (guessed at) 2020 revenue number, and that they could double their revenue every year for the next several years after that. If that’s more than a guess, it’s clearly worth a gamble… even with high selling costs in the first few years (training, distribution, building the market demand) they should see some decent cash flow from the 50%+ gross margins on the device and, presumably over time, the higher margins on the cartridge refills.
The risk, of course, is that it might fail pretty completely. Police departments might not order it. The next person who gets “Bola’d” might catch the barbs in an eye and scare departments away from using it in “lower risk” situations (there is a laser aiming system, but I’m sure there are some “uh oh” scenarios that could arise). Some competing product might come along. Police might hate it once they’ve carried it for a few months, and revolt against adding another doodad to their utility belts. I have no idea.
And the stock-price risk is also that they’re likely to need a lot more capital if they’re going to “go big,” so they could roll out a secondary offering at any time, and management might find that particularly tempting now that the shares have doubled so far this year,… and though that shouldn’t be a huge factor over the long term, since it’s obvious that building a large company will require more capital, it’s certainly true that investors often panic about share offerings and dilution when they’re speculating on little stocks like this.
But the upside potential is tempting, and the reality is that there does seem to be a widely-discussed “gap” in available non-violent and painless methods for subduing people who aren’t super-dangerous but might flee or, particularly, the mentally ill who can’t be talked into submission with threats and who police officers don’t particularly want to wrestle, or to hit with pepper spray or a club. Especially not on camera.
So after thinking this over for a couple weeks, and particularly because I think getting a bunch of distributors lined up and having Tom Smith from Taser on board could help them to get to commercialization relatively quickly, I’ll bite — I’m taking on a small position in Wrap Technologies and will watch with interest as they try to roll it out. This is one that will be volatile and will likely either be a huge success in a few years or an abject failure, so I’ll just assume a 100% risk and size my little position accordingly, with the intention of ignoring the share price action for at least a year or two.
And yes, in case you’re wondering, it’s not just Frank Curzio — other newsletters are also starting to be intrigued by this “story stock” and some others have issued promos to that effect, Bill Patalon at Money Morning’s Private Briefing had a similar teaser pitch for WRTC, also in mid-May as the press coverage of the company was heating up (you can see lots of videos and media coverage on WRTC’s page here), and I wouldn’t be surprised if we see others if the company becomes more “real” with some meaningful order announcements over the next year or so.
It’s your money, so it’s your choice — I find this one interesting though pretty high-risk, what do you think? Expect to see BolaWrap in the hands of your local police in a year or two? Think it will remain a niche device and fail to catch on? Not so intrigued by a company with no real orders yet? Those are all reasonable stances, and I’m sure we’ll have a hundred different opinions among the vast legions of Gumshoe readers — let us know your thoughts with a comment below, please.