I haven’t written about a Lou Basenese teaser pitch for a while, so a few reader questions about his latest “perfect 5G stock” teaser sent me down the road we’ll travel today. The ad I’m looking at is for Baseneses’ Trend Trader newsletter ($149/yr), and he has worked with a variety of publishers over the past decade or so but now appears to be published by Crowdability.
Here’s a little taste of the hype in the ad:
“It trades for just $2 per share… its ‘gatekeeper’ technology holds hostage the entire $12 Trillion 5G revolution… it just secured a CRITICAL 5G patent…
… and by October 1st, my research says a major smartphone player could buy out this tiny company and hand us a FAST FORTUNE!”
The ad has the typical long spiel about how 5G will be groundbreaking, changing the world in unimaginable ways as remote surgery and self-driving cars and other cool stuff become mainstream over these higher-speed wireless connections, but we’ve heard that a thousand times now so we’ll just skip to the bit about this “perfect $2 stock” … which, we’re told, is “perfect” mostly because it’s small, unknown, and has a patent on a technology that everyone will need… which means the royalties should be rolling in soon (or, as Basenese says, perhaps they’ll be taken over to get control of that technology).
The patent is from November, and he blacks out some of the key information (like the patent applicant, the inventors, and the patent number), but there’s still plenty of info to confirm the company — which means we can be a little quicker than usual today. Here’s one more bit of hype:
“Although you’re not seeing ANY news coverage on this, just days ago this tiny company locked up the world’s most valuable 5G patent….
“Which makes it 100% legally binding that this company gets PAID for anyone wanting to access its 5G breakthrough…..
“Now that this patent is locked up, it means all the big 5G players have NO CHOICE but to pay this tiny firm a royalty for its device.
“We’re talking about legally forcing any of the telecomm giants like Verizon, AT&T, Sprint T-Mobile….
“And ANY smartphone manufacturer like Apple or LG that wants The PERFECT 5G stock’s technology….
“To pay this tiny company.”
That’s a shortened version of the pitch, to be fair — he included lots of “what if” language in there, perhaps to assuage his lawyers so he can claim this is just a hypothetical, but that’s the basic idea… this company has the best technology, they’ve got patents, and anyone who wants to use their best 5G tech will have to partner with them and pay royalties.
He also hints that…
“This tiny $2 company has ALREADY signed a $10,000,000 deal with one of the leading tech companies in the world…”
And he later goes on to say that the company is already working with Samsung, as evidenced by one of their pieces of tech being found in a teardown of a Samsung phone, and that they’re also working with Murata, which is an Apple supplier, so might perhaps be in the next iPhone.
I have no idea whether or not they’ll get any Apple business, but we can at least take you out of your misery and reveal the “secret” — this is another tease of a Resonant (RESN), a small-cap RF filter technology company that is indeed trying to push adoption of its patented filter technologies in 5G phones.
Here’s now Resonant describes itself:
“The filtering problems of RF front-ends are rapidly becoming so complex that very few companies can solve them. At Resonant, we have developed a fundamentally new suite of technologies we call Infinite Synthesized Networks®, or ISN®, to configure and connect acoustic resonators, which are the fundamental building blocks of RF filters.”
You can see Resonant’s latest investor presentation here, it lays out the case for the company pretty well and certainly tries to make a claim similar to Basenese’s, that Resonant’s technology will make filter development faster and cheaper, and that 5G should dramatically increase their royalties as they move their XBAR filters into development with an “industry leader”.
Resonant is a very small company, with a market cap of about $120 million and no real revenues yet — they did receive an initial $2 million pre-payment of an anticipated total of $9 million in royalties (over several years) from Murata last year, and that showed up as a receivable on their cash flow statement but they apparently haven’t actually earned it yet, it hasn’t hit their income statement. Regardless, though the company is still on pace to burn through roughly $30 million a year, mostly on R&D and selling/administrative costs, so even a high-margin royalty of a couple million dollars a year isn’t enough — they need to get bigger.
Will they get there? I have no idea. If you’re interested in committing some capital to this technology startup, I’d urge you to listen to their recent presentation with Loop Capital and see if you find their plans reasonable, and explore their website to get a handle on how you think they’ll make money. The royalties will presumably be quite small, since RF filters are small devices and it’s a very competitive business, but if they can get their technology used on products that are inside iPhones and negotiate a per-piece royalty it could quickly become large even if the per-device royalty is minimal.
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Resonant has been teased before, most recently by Chris Wood, and they were also an MBD Capital client and were publicly promoted by Lou Basenese five or six years ago, back when the rumors swirling were that Skyworks was partnered up with Resonant and might acquire them, and there was some very critical coverage of the company by the short selling folks at The Street Sweeper (which isn’t around anymore).
This is what I wrote a little over a year ago, when Chris Wood was teasing Resonant:
“The business model is appealing, I love royalties, but these are such low-cost items that the scale required to actually generate meaningful revenues, even for a tiny $85 million company, is pretty overwhelming. I only looked into this one for a couple hours, but don’t see an easy pathway for them to cover their operating costs with royalty revenue unless they become “built in” to a big chunk of the global RF filter business, which would be a huge accomplishment for a brand new company competing in an industry of titans (like AVGO and QRVO)… so it might be a fun story and it’s not impossible, but my initial reaction is that I think the risk is too high and that their sales growth will likely be disappointing in the near term.”
(In case you’re curious, by the way, no, that move from a $85 million market cap in April of 2019, when I penned those words, to $120 million today, is not representative of shareholder returns… the stock price is actually down 20% or so, the market cap is larger because they sold more stock).
And Resonant’s history of heavy promotion and “overpromising” by the company or its mouthpieces, really, is a bit of a yellow caution flag for me. Basenese is not the only one who has been fascinated by these kinds of small-cap “we’ve got a brand new patented technology that will take over the world” companies, but he seems to have had a finger in most of the MDB stocks that went through that overhype-to-disappointment cycle (sometimes multiple times). At one time or another he has teased or publicly recommended probably at least half of the higher-profile “small cap IP” companies that MDB Capital helped to launch, including some stocks that turned out to be heavily hyped penny stock disappointments after their initial surge, like UniPixel (UNXL), ClearSign (CLIR), Parametric Sound (bought by Turtle Beach (HEAR)), Ideal Power (IPWR), VirnetX (VHC) and Energous (WATT). I think UniPixel is the only one that has actually disappeared into bankruptcy, but they’ve all been hype-driven gobblers of capital for anyone who bought during the initial surge of excitement.
That’s not Basenese’s fault, particularly, I don’t know what his track record is like otherwise, or when he might have sold or recommended a sale on all of those stocks. All of the small cap tech newsletters seem to drift from time to time into the orbit of MDB Capital or other promotional brokers and conferences (like LD Micro) as they look for new names and new ideas.
The fact that Resonant is specifically from that MDB cohort, though, with a CEO from Energous, leads me to be more concerned about the likelihood that they’re overpromising on their potential than I am about “missing out” on some historic run, so I don’t think there’s a real rush… we’ve got time to think it over, try to figure out whether the company has a real business that can scale up dramatically enough to cover their operating expenses and make a profit one day, and be our own best counsel.
That’s just my thinking, though, and maybe I’m wrong… or maybe you’ll disagree. Have any thoughts on Resonant you’d like to share? High hopes for the future? Let us know with a comment below.