I’ve been getting buckets of questions about the latest pitch from Dr. Kent Moors for his Micro Energy Trader ($3,500/year, limited “performance guarantee” refunds possible), so that’s what we’ll dig into today.
The pitch is typical of Moors’ stuff, in that he conjures up this idea of an earth-changing new technology that is the province of “one little company” and will make you rich, with 50,000%+ returns… in the past, that’s always been a wild exaggeration (to be generous), but we’ll start out with an open mind. Here’s how the ad begins:
“It could create 2.7 million American jobs…
“Save 610,000 lives from deadly diseases…
“And unleash $3.9 trillion to the U.S. economy…
“Delivering early investors the profit opportunity of a lifetime”
So what is this “electro-wave inversion?” The spiel is that it’s a new and advanced imaging technology of some kind that can see through the walls of Fort Knox…
“Practically NOTHING’s ever been able to breach Fort Knox.
“Until now…Are you getting our free Daily Update
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“You are looking at one of the most important innovations in modern history.
“So important, it just received special clearances…
“From both the U.S. Department of the Interior and the White House.
“And it could deploy any day now.”
“This specific EWI device is around the size of a quarter in diameter.
“And it’s just about an inch or so tall.
“Yet this tiny miracle has the power to unlock $3.9 trillion in new wealth…”
Laying it on thick, right?
“12 global Fortune 500 corporations…
“With collective market caps clearing $2.1 trillion…
“Are lining up to cut $50 million checks to a tiny $8-per-share tech company…
“Just for the rights to ‘beta test’ this technology…”
OK, so it’s $8 a share. That’s one clue. And it’s a small sensor of some kind. Other details?
“There’s only one way to describe these devices…
“It’s like having an MRI machine that can see 10 miles deep into the Earth’s crust.
“All while fitting in the palm of your hand.”
OK. And apparently it’s got other uses as well beyond those Fortune 500 corporations…
“For the U.S. Navy, it can be 100 times more accurate at spotting enemy submarines than the best military-grade sonar.
“The United States Geological Survey could use one to detect volcanic eruptions in Krakatoa, Indonesia… two days before it even takes place.
“And Barrick, the $15 billion gold miner, could use one to find 92 times more gold in a single year… than has ever been found throughout all of history.”
And, of course, the big promise:
“Ahead, I’m going to show you how a modest $1,000 stake in this tiny firm at the heart of these EWIs could grow into a $557,560 jackpot.
“But first, it’s critical that you’re aware this could all happen in a flash…
“Because this tiny company has already turned the global $1.4 trillion energy industry on its ear.”
OK. So what’s the rush? Apparently there’s some kind of plan to “greenlight” this technology right away… back in February, this is the wording used:
“I’m going to examine what could be a government-mandated, nationwide rollout of this technology on April 1.
“And most importantly, I’m going to reveal the one tiny company that is perfectly positioned for an event of this magnitude.
“It has been awarded 107 patents for this technology.
“And could soon begin collecting check after check from some of the largest U.S. energy companies.”
Now that’s been updated to say that…
“Executive Order 13795 goes into effect on AUGUST 21”
“… on August 21, top executives from some of the world’s biggest companies – including Exxon and BP – will be attending a private meeting in New Orleans… just to bid for the exclusive rights to use this technology.
“I’ve been asked to take part in this meeting. And I can tell you this is going to be one hell of a bidding war.
“These companies are ready to throw tens of millions to get their hands on this technology.
“And it all happens on August 21.”
“… this company is manufacturing one of these devices every four seconds…
“Just to meet the overwhelming demand.”
And it’s still quite small, but has some big backers…
“Its market cap is just $114 million…
“Bill Gates has personally invested $60 million into this.
“Hedge fund billionaire James Simons’s firm, Renaissance Technologies, has over $8 million riding on this $8 stock.
“And over 18 multibillion-dollar institutions have backed them as well.”
OK. Pretty much every publicly traded company has “multibillion-dollar institutions” backing it, and Renaissance Technologies means essentially nothing when it’s on the holdings list of a company (yes, James Simon’s firm is arguably the most phenomenal money manager in history, but their advantage is quantitative analysis and rapid trading, knowing what they owned last quarter is not generally very useful).
So what is this sensor? It’s something to do with “infrasound,” which is lower-frequency sound than humans can generally hear….
“Infrasound can be over
“10,000 times LOWER than ultrasound.”
And, no surprise since this is Kent Moors we’re talking about, this is really an oil and gas story…
“While this technology is attracting the eyes of the U.S. Army, Navy, and NASA…
“To completely replace satellite, GPS, radar…
“And even some medical equipment…
“There’s a reason this $114 million market-cap company…
“Controlling ALL of their 107 EWI patents…
“Is foregoing easy U.S. Government cash…
“Just to disrupt a MUCH more lucrative segment.”
OK, so who is it that makes these little sensors and is going after a big US market? The only other clue of note was that the stock is listed on the NYSE… so, Thinkolator sez he must be teasing us about ION Geophysical (IO), the seismic services provider that has ridden the offshore oil and gas boom up and down several times in its 20+ years as a public company… mostly recently “down” in a big way since the 2014 collapse in oil prices.
ION Geophysical was at a $114 million market cap back in mid-January (when it was indeed at $8 a share, so that’s a good match), though it had a good start to the year and reached $200 million and $14 or so at the peak (it’s now below $100 million and $7/share).
The insider mentions were roughly accurate as of earlier this year, Rensaissance Technologies and Gates Capital Management were large shareholders of IO, and are still, though it looks like the copywriter screwed up — Gates Capital Management is an asset manager run by Jeffrey Gates, with a few billion dollars under management, and has nothing to do with Microsoft’s Bill Gates. Gates Capital owns about a million shares at roughly $7 million in value, so maybe someone also mixed up their decimal points — if anyone had invested $60 million in this company anytime in the past couple years, they would own roughly half the company… which doesn’t typically happen with small caps in the public markets. And no, there haven’t been any substantial oil or seismic data investment made by Bill Gates, at least in public companies in recent years (his holdings are generally listed under Cascade Investments or, more recently, the Bill and Melinda Gates Foundation).
It’s not a perfect match, though — Ion claims “approximately 500” patents, so I don’t know where the “107 patents” bit comes from. They are indeed a manufacturer of geophones, through their Sensor subsidiary… and, yes, they produce a new one every four seconds at their factories. The images in the ad appear to be of the SM-24 rotating coil geophone, which is their core product — you can read all about it in their brochure here.
Ion is much more than a maker of geophones, thankfully, because sales volume has been pretty light in that area — they reported six months ago that only about $8 million of their $75 million in revenue came from devices, and that’s been a fairly consistent percentage… it’s a little lower now than it has been in the past, mostly because there isn’t as much seismic data collection going on at the moment, so there isn’t as much demand for the big towed sensor arrays that are dragged behind ships to collect subsea images for oil companies.
No, ION these days is mostly a services company — they provide analysis of seismic data, and sell access to the data they’ve collected in the past (their “data library”). This can be a really good business if you get the right data, mostly because creating and processing a good seismic “map” of an important exploration area can return your investment fairly quickly if you get a couple key customers to subscribe to the data right away, and then you own the data in perpetuity and odds are pretty good that some of it will be useful to another customer in the future.
And ION has also been on the short end of a very long legal stick for almost a decade, having been sued by WesternGeco and ordered to pay damages in a patent case that went to the Supreme Court — and is now back in the Circuit Court of Appeals to determine whether ION owes further back profits from foreign use of WesterGeco’s patents. That determination seems to be the primary reason for the stock’s recent run, since the announcement came on January 11 — ION is not out of the woods, from what I can tell just from reading their press release, but things are looking up, partly because some of the patents in question are themselves questionable.
The stock price seems to have ridden this legal case to some degree, which is understandable since it’s a small stock and the initial award of $100 million or so was more than the market cap in 2017. And ION was a billion+ dollar company before the 2014 collapse in oil prices really gutted the value of offshore seismic fleets and seismic data libraries (if oil is below $50, the enthusiasm to do very expensive offshore exploration and development, at least in deep water, is severely diminished). I haven’t looked into the lawsuit developments since February, so it might be worth following up if you’re interested in that aspect.
How else does this match? Well, the tease points out that this “Electro-Wave Inversion” was critical in finding a big new shallow-water oil discovery in Mexico in 2017… and that this secret company was integral to that discovery. Which is true, but it had nothing to do with new “infrasound” data or breakthrough sensor technology, it was because of ION Geophysical’s reprocessing and imaging services — their analysis of old data, not the collection of new data with some magical new technology. And yes, most seismic data is collected on “infrasound” frequencies.
In fact, the most basic technology that the tease refers to has been around for more than a century — the big quotes about how this is “one of the greatest scientific achievements of all time” (European Journal of Physics) seem to be references to the very concept of electromagnetic induction, discovered almost 200 years ago by James Faraday (and maybe almost simultaneously by Joseph Henry). That is obviously a foundational part of the modern understanding of electricity and physics, and led to most of the designs for electric motors and generators, as well as being a key to developing these sensors which detect minute movements of magnets along their coils (I’m sure that’s a gross oversimplification).
And there are other clues aside from the “107 patents” that don’t quite fit — there’s a bit about how this company is working with ExxonMobil for the first time…
“ExxonMobil has entered its first agreement with this small tech firm.
“They’re deploying EWI devices to a project in Africa.”
And it’s true that last year, ExxonMobil was responsible for more than 10% of ION Geophysical’s revenue (as was Petrobras), and perhaps that higher level of sales to ExxonMobil was related to their oil work offshore Ghana, where ION has participated in a few thousand kilometers of data collection in partnership with GeoEx to support Ghana’s first licensing round, but ExxonMobil has also been a customer of ION’s in the past.
Though there are also some good specific matches — like the word that Shlumberger “turned to this small company to analyze an 80,000-square-kilometer site,” which jibes with Shlumberger’s work with ION Geophysical offshore Mexico starting back in 2016.
The “US government” stuff that was attached to the “April 1” deadline in the first version of this ad is all about offshore US oil exploration — as you’re probably aware, the Trump Administration has pushed forward to do more offshore oil exploration, particularly in the Atlantic, and that will first require a lot of seismic data collection (there’s been no real data collection or exploration offshore the east coast of the US for probably 30+ years, and not much before then). That would probably create more business for ION and the other seismic providers, and the administration has provided the first level of approval for the seismic data collection (needed mostly because of the potential that seismic air guns, which create the sound that echos off the layers of earth underground, have the potential to at least harass marine mammals… which requires government permission), though in my inexpert opinion it’s not likely to dramatically change ION’s business overnight (and it will probably be slow, in any case, since some states will object and the plan is not really even in place yet). ION does not even really mention the possibility of Atlantic seismic collection as a near-term business driver in any of their investor info, they are much more focused on areas where exploration is already well advanced like offshore Brazil and Africa and in the Gulf of Mexico.
That was the original version of the ad, though — now that April 1 date has passed, with no real impact for any seismic companies (as expected), they’ve moved on to a new invented deadline — August 21 is now the day… here’s what Moors says in this updated version:
“These companies are ready to throw tens of millions to get their hands on this technology.
“And it all happens on August 21.”
Yes, August 21 is an important date for offshore oil — though it’s not necessarily going to bring any huge changes right away for ION or any other oil service firms, all of whom have seen falling share prices lately (IO is down by about 40% since the first version of this ad ran late in February, and by more than 50% since that first “April 1” deadline… April Fools!). August 21 is the day that the Federal Government is selling more offshore oil leases in the Gulf of Mexico as part of President Trump’s plan to open up more US waters to oil exploration (the April 1 date was about East Coast exploration, which is much earlier stage), and those who want to buy those leases will have to explore them, almost certainly using seismic equipment.
How about that other stuff they hint at, how this could also save lives? Here’s a bit of tease…
“Physics Today reports EWIs could have life-saving medical applications.
“Primarily, preventing cardiovascular disease.
“By detecting infrasound, EWIs could find slight irregularities in heartbeat and blood flow.
“These are DEADLY precursors that lead to heart disease….
“Professionals are blown away by the results.
“Molecular biologist Nigel Flynn noted “[this] technology will dramatically impact mortality rates of the world’s leading cause of death and extend human lifespan.”
“It could save 610,000 lives in the U.S. alone!”
So that’s pretty much just hooey. Not that the technology doesn’t exist, it does — it just doesn’t mean anything for IO, or anyone else in the near term. And it’s not “a professional” who thinks it will “dramatically impact mortality rates,” it’s the Chairman and President of the company that’s trying to develop a commercial sensor that uses this kind of “passive listening” technology. They’re called Infrasonix, and they’re currently trying to develop a prototype of what they call an “Infrascope,” which essentially just collects sound at low frequencies and can therefore listen to things like the blood flowing through the body.
But the “hooey” is that this doesn’t have anything to do with ION Geophysical, or with any other manufacturer of infrasound detectors or sensors. They haven’t even designed a product yet, let alone try to source the parts, and there are at least dozens of manufacturers of sensors that can detect infrasonic frequencies, none of whom would have their financial picture changed meaningfully by this in the near term (no, in case you’re curious, Infrasonix is not public — this is a crowd-funded startup that will probably raise more money to take their next steps fairly soon. I’m sure they’d like to get involved with a large medical device or wearables company to commercialize a product, but there are also tons of other researchers working in this area. Infrasonix licensed their technology from NASA, for whatever that’s worth, and, again (and perhaps obviously), has nothing to do with ION or any of the other major seismic sensor companies… it seems to just be a story that makes ION’s sensor business sound more important than it is.
So yes, seismic data and infrasound sensors are a real thing. And they have made a huge difference in oil and gas exploration, and the technology does continue to improve in an iterative way each year… though it’s not really controlled by a single company or owned entirely by, in this case, ION Geophysical (there are several decent-sized seismic data companies, including some fast-growing Chinese competitors). Moors’ copywriter seems to be using a fairly typical trick, explaining the incredible value and importance of seismic data for oil exploration… but then skipping a bunch of steps and implying that this whole technology is somehow new or owned by “one little company.”
ION itself might be interesting if you’re patient… they’ll need another surge of interest in offshore oil in order to really become profitable again, but those surges have tended to come about every now and then as oil prices surge, and some reasonable people are predicting that we’re on the cusp of another offshore oil boom if global demand continues to increase. They’ve also delevered quite a bit, and they think they’ll be able to repay their upcoming 2021 debt when it matures, so that provides some comfort. They’ve continued to say that they expect 2019 to be better than 2018, subject to exploration budgets, which isn’t saying a lot because 2018 was terrible… but better is, well, better than worse, and IO has seen revenue rebound a bit this year (not enough to get them back to profitability, and analysts don’t think they’ll be profitable next year, either… but they’re losing less).
Mostly, what matters is oil prices — higher oil prices and the expectation of higher future prices are what determine investment by the big energy companies, and if they invest more than they buy more seismic data, and spend more money building new seismic arrays or vessels and upgrading to the latest technologies. Here’s the chart for the last 10 years that shows WTI crude oil prices (blue), ION Geophysical revenue (red) and the IO share price (orange). It looks pretty clear to me that the 2014 collapse in oil prices dramatically impacted ION’s revenue, and it has never recovered… which has not given the share price much room to recover. The share price does respond temporarily to bumps up in oil prices (like we saw last year), but since the oil price came back down after those recent highs, it didn’t translate into more exploration spending and more revenue for IO. Maybe it will in the future if oil prices recover or at least stay above $50, but oil prices are in many ways just a guessing game that has a lot to do with global demand and GDP growth, with a side of war and Middle East brinksmanship thrown in.
And that’s about all I can tell you. Interested in ION Geophysical? Think you’ve got a better match for those clues? Let us know with a comment below. We’ve left the original comments from the February version of this ad and article below to get you started.