This article was originally published on January 17, 2019. The ad is still in heavy circulation, and we are still getting a lot of questions about it, so we’re re-posting our commentary here. The ad is still dated December 2018, and what follows has also not been updated or revised (the price of the primary stock discussed, Ilika, is back to roughly where it was in February, after the initial pop on all that new attention from Matt McCall — the company has not made any dramatic news in the interim and will probably report results in mid-July). We have also left the original comments appended to this article, they include some great feedback and questions and suggestions about a few other stocks in the sector.
“Forever battery,” “Jesus battery,” the “holy grail” of energy storage… those are all terms we’ve heard thrown around before, and in this instance they’re used by Matt McCall in service of his new pitch for his Investment Opportunities newsletter ($49/year for the “basic” version).
And like other advances in batteries, of course, he thinks there’s a way to get rich from it. McCall calls it the “Quantum Glass Battery” and says that all the big energy and tech companies are getting on board, as is the inventor of the lithium-ion battery (John Goodenough).
So will this latest battery be what “sets us free from the scourge of fossil fuels?” That’s a lovely thing to hope for, of course, and it will probably take some breakthroughs in energy storage to make renewable energy a much larger part of our energy supply (since, of course, the wind doesn’t always blow and the sun doesn’t always shine, and battery charging is nowhere near fast enough to replace gasoline refueling right now at scale), but let’s see if we can ID the stock he’s talking about, then we can try to separate the stock from the hype and see if it appeals.
The first part of the ad is all about safety — demonstrating with some videos the flammable nature of the lithium-ion battery cells, particularly when they get pierced, and then showing a video to demonstrate that this prototype “Holy Grail” battery can take three gunshots and still keep charging your phone.
And he lays it on thick, as ad copywriters always do:
“I call it the Quantum Glass Battery.
“But, as amazing as this is, this is NOT what makes this new type of battery so awe-inspiring.Are you getting our free Daily Update
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“This short demonstration offers just a TINY TASTE of something much more revolutionary…
“An evolutionary leap in technology so profound — so transformative — it will likely change everything about your life — from how you get around, to how you communicate with others, even the way you think about the world….
“‘The battery of the future.’ —
He says that this new “Quantum Glass Battery” will also provide “lightning-quick charging”… with a charge that can also last for weeks, not hours, and a much longer lifecycle (over 100,000 recharge “cycles” without degrading, compared to a few hundred for current batteries).
So that pretty much takes care of all current complaints about batteries. As long as it’s fairly light, seems like we’re pretty much guaranteed to all be using this new battery in a matter of weeks, no?
Well, these things take time to go from the lab to the real world. Lots of time. And companies in the past have tended to roll out new battery technologies and chemistries veeerrrryyyy slooooowwwwlllyy… largely because the technology just isn’t ready for commercialization, both because the materials science takes a while to make progress and because of the massive investment required to create new battery manufacturing capacity (and, of course, a new technology is always a risk — particularly when the old one is also still improving nicely each year and is cheap and familiar). The world always moves a lot slower than the marketers would like.
But still, we want to know what company or technology he’s talking about.
And he says it’s already in the works…
“All 5 of the biggest lithium-ion battery makers on the planet are now shifting their focus to this technology…
“Everything you own that requires a battery is about to undergo a major overhaul — digital cameras, flashlights, portable chargers, remote controls, power tools, coffee bean grinders, Bluetooth headsets, GPS devices, blood glucose monitors, pacemakers, electric razors, wristwatches… the list goes on and on…
“As Wired magazine says, “This is the battery breakthrough that could change everything.”
Wait, if all the big players are already switching to this technology… how is it that we’re supposed to get rich? Does he want us to buy Panasonic or something? (Probably not, but, for what it’s worth, that was one of the stocks pitched during the initial Tesla Gigafactory craze, back in 2014… with not much to show for it four years later and the stock down some 20%, despite the fact that the Gigafactory did open and they’re selling a heckuva lot of Tesla batteries…. be wary of huge companies that are teased as beneficiaries of breakthrough new technologies, it takes a lot of peanuts to feed an elephant.)
So we can probably stipulate that those big guys are all “investing in” this technology, not “switching” to it… can we please get some actual clues?
“NOWHERE will the coming ‘Quantum Glass’ Battery revolution have a more profound — more truly far-reaching — impact than in the worldwide multi-trillion-dollar automotive industry…
“Where just about every major car manufacturer is chomping at the bit to get this type of battery inside their fleet of vehicles…
“In short: This technology is going to finally thrust electric and autonomous vehicles from a fledgling industry…
“Into a mainstream $3 TRILLION global juggernaut…”
OK, so it’s electric car applications that excite him. What else?
“Already companies have begun ripping out outdated lithium-ion battery technology in today’s electric and driverless vehicles and are replacing it with the ground-breaking new “Quantum Glass” Battery technology…
“And the results are nothing short of earth-shattering…
“According to automotive industry insiders, one creation using the “Quantum Glass” Battery technology can fully charge an electric car in as little as 60 seconds.”
The technology is always changing, but that sounds a bit more extreme than the reality — they may be “ripping it out” in the lab, but not in production, nobody is using a solid state battery in a car just yet… though Henrik Fisker keeps claiming he’s already got one ready that he’ll show you… later. The auto industry is as full of hopeful showmen as the newsletter industry, so we should probably change that to “can theoretically fully charge an electric car in as little as 60 seconds… as long as the battery turns out to be commercially viable and safe and fits in the design and someone actually starts producing it.”
“The largest auto parts suppliers in the world — Bosch and Continental — are now backing the technology behind the ‘Quantum Glass’ Battery.
“Caterpillar, the world’s leading construction equipment company, is aiming to adopt the technology too, for its trucks, diggers, and excavation equipment.
“The world’s biggest manufacturer of spark plugs for gasoline engines is restructuring its entire business to take part in the ‘Quantum Glass’
OK, so what we’re obviously talking about here is solid state batteries, the replacement of a liquid electrolyte in the lithium ion battery with a solid of some kind, which makes different form factors possible and cuts down on the risk of a runaway reaction or a fire if the battery is pierced. And those big companies are all working with solid state battery technology to try to see if it will work… so I guess they’re technically all “backing” this technology, but they’re all trying different techniques and materials and partnering with different R&D labs.
As with many such pitches, this one seamlessly goes from “this technology will revolutionize the world,” which may well be true if it can be commercialized, to “this one little company is destined to dominate it all,” which almost never turns out to be the case with new technologies.
But anyway, a few more clues and a touch more hype:
“I have no doubt this will be the biggest story in the automotive world over the next several years.
“Right now, you can get in before the investing mainstream even catches a whiff of these developments.”
And he alludes to the huge billionaire investing fund that Bill Gates has spearheaded, with the backing of Jeff Bezos and Richard Branson and lots of other high-profile folks — that’s real, it’s called Breakthrough Energy Ventures and it is intended to “commercialize energy innovation at scale,” though it’s only a couple years old at this point and it’s certainly not taking any companies public anytime soon (they do have some interesting sounding investments in batteries and grid storage, including solid state batteries, but these investors are not pushing for quick returns, they’re pushing to change the world a decade from now).
And then, of course, we get to the “one tiny company” argument that is so often at the heart of a stock pitch for a new technology:
“You see, the real story — and the story few people outside a small circle of high-level scientists, engineers and in-the-know insiders know about— is the tiny company at the epicenter of this groundbreaking technology…
“This firm — which is off the radar of 99% of the investing public — has secured the key patents to the technology behind the production of the ‘Quantum Glass’ Battery.”
How does it feel, being just $49 away from owning the patents on the energy storage technology that will dominate the world for the next 20 years? Yeah, you’re probably not — sorry. That’s not the way things work.
But we will endeavor to find the name for free, so that way you don’t need to be disappointed that the hype inspired you to believe something that’s floating 1,000 feet above reality.
And the hype continues, making us practically drool in anticipation:
“A chance to learn how to get in on the ground floor of the tiny firm that’s paving the way for the global $3 TRILLION electric car revolution.
“While it’s still trading for peanuts…
“While NO ONE else knows about it…
“This is like being the first to know about a little-known $1 stock called Netflix in 2003 that would go on to disrupt the entire $496 BILLION entertainment market…”
Don’t worry, it’s not just the next Netflix, it’s the next Microsoft and Amazon, too, poised to dominate pretty much every fun market in the world (Smartphones! Laptops! Internet of Things! Cars!)
OK, get your heart rate back down. What’s the actual company?
“One tiny company—less than 1/1,000 the size of General Motors—who owns the critical patents to the Quantum Glass Battery….
“… patents have already been granted and approved in SIX major automotive markets across the globe, including—
* The United States
* Great Britain”
OK… so some patents around the world, market cap under $50 million or so. Other clues?
“… one of the biggest car companies in the world — a $198 BILLION multi-national behemoth — has sought this tiny firm out.
“This auto giant produces 10 million cars a year and commands a leading 9.2% of the global car market.
“They’ve forged an historic partnership deal with this tiny firm to fast track the production of the technology behind the Quantum Glass Battery… to get it into their cars and bring it into the global mainstream.”
OK, so that’s Toyota… no one else is very close to that big these days. And yes, Toyota and other Japanese automakers are trying to “catch up” in electric vehicles with a partnership to “fast track the development of solid state batteries” … but that’s a team-up of giants, no microcaps need apply (Panasonic and GS Yuasa on the battery side, Toyota, Nissan and Honda on the auto side). Toyota is working with lots of battery researchers and battery companies to test products as well, of course… though it’s also worth pointing out that when they say “fast track” they mean they’d like to have solid-state batteries in cars by 2022 or 2023, with lots of folks, including some folks at Toyota, saying that 2030 is more likely for commercial-scale production.
“Another is the 4th largest auto company in the world who produces more than 5 million cars per years… 20 million motorcycles… 6 million power products.”
So that’s Honda, which, as you might imagine, is also working with lots of different battery partners and consortia.
And we’re told that “production is nearing the critical pilot stages.”
Which presumably means the pilot stage for new production lines for batteries, not actual cars that use the batteries.
Then the spitballing about the effervescent future:
“Let’s say this company’s battery captures just one half of ONE PERCENT of the global electric car market in the coming years…
“That will be enough to boost its revenues to more than $2 BILLION when production and sales are in full swing…
“That’s an incredible 27,746% increase from where it stands today.”
What does that mean? Well, the one half of one percent thing is just a made up number, meant to make you think it’s conservative… but as a clue, it means the current level is somewhere in the single millions – roughly $5-10 million.
And, for a final clue…
“This stock does not trade on a conventional U.S. exchange. In short, the opportunity before you right now is the same kind of potential you’d see in an early-stage, venture capital opportunity — where a tiny start-up’s revenue can spike 27,000% or more over a short period of time. Buying shares is easy, but will take a little more work than it takes to buy regular U.S. stocks. The majority of online brokers will allow you to buy shares.”
So who is it? Thinkolator sez this one seems most likely to be tiny Ilika (IKA on the London Stock Exchange, there is a US OTC symbol at ILIKF but it doesn’t really trade as far as I can tell), a small R&D company that calls itself a solid state pioneer and was spawned (15 years ago) from some materials science work at the University of Southampton, with some initial work with Sony and others on trying to make safer and non-flammable batteries by using a solid electrolyte instead of the liquid in Li-Ion batteries.
Why this stock? Aside from the fact that it went from 10,000 shares traded a day for most of the previous few weeks to 500,000 shares traded yesterday, when this ad presumably was getting signups, it also matches the other clues quite well. But that doesn’t mean it couldn’t be someone else — the clues are not very specific and there are lots of hopefuls in the solid state battery space, and every major manufacturer in automotive or electronics is investing in it as well… all of which have much bigger R&D budgets than the little guys. Other relatively unknown battery names I came across that are working in the area, just to name a few, include Maxwell Technologies (MXWL), Nano One Materials (NNO.V, NNOMF), and the once-bankrupt A123 Systems (now, like the original Fisker car company, owned by Wanxiang). (None of those come close to matching the clues, by the way, just examples).
And it is really overwhelmingly tiny, with a market cap of under $30 million (about GBP$18 million right now)… so to some degree that’s actually an argument against it — it’s hard to justify teasing an illiquid $30 million stock to a huge audience, particularly one that you’d have to buy on the London Stock Exchange… and it’s a very low-priced stock at about 18 pence, so even the big burst in trading that Ilika saw on the day this ad rolled through wasn’t that big: It amounted to only about $100,000 worth of shares changing hands. A lot more than usual, but not a lot for an Investorplace/Stansberry ad campaign.
Ilika’s important product line is called Stereax, and they’ve recently been focusing on automotive applications after making progress on thin film lithium batteries (yes, they’re still lithium batteries — they just use a solid electrolyte instead of the liquid one in most li-ion batteries, partly because it’s the liquid that makes them so flammable and dangerous, apparently). The first wave of products are likely to be using their M250 line in small medical devices and sensors that can handle moisture and hold a trickle charge well, and their high-temperature P180 that’s most likely to be used first in Internet of Things and industrial sensors, possibly including small automotive applications — the real “electric car” possibility is with Goliath, which is not as far along. Probably the best quick overview is their presentation to an investor conference from November, and they do a decent job of explaining their basic battery technology here.
Ilika has been public for quite a while as a microcap R&D company, with essentially flat revenue over the past five years (about 1-2 million pounds a year). So that doesn’t quite match, but it’s fairly close — mostly because they just got a big 4.2 million pound grant from a UK electric vehicle challenge. They are aiming to be similar in business model to the chip design firm Arm Holdings, which is no longer independent but was a huge gainer for a while as it licensed its basic semiconductor architecture designs for all kinds of products.
Their hoped-for scaling up of solid state battery production using their technology is still a ways off, but they sound fairly ambitious — partly because of funding from the Faraday Battery Challenge and other grant programs in the UK — and think they can have a pilot plant in operation late this year to prove the manufacturing technology and process, then have a joint venture with a large manufacturer perhaps as soon as 2020, maybe with additional grant funding.
It all sounds quite cool, frankly, and I do like the Arm-like “asset light” model of patenting and proving technologies and then licensing them to much larger partners who can fund the heavy lifting and manufacturing and pay a relatively modest royalty or license fee. But, of course, a lot of their work is still not ready for prime time (including Goliath), and they don’t have many licensees or partners yet who are actually producing anything (the vast majority of their… but they do sound optimistic (you can hear a presentation from them a few months back here).
And, of course, this little UK solid state battery technology developer is not the only company working on this area. They have competition both from the established lithium ion battery companies, whose products are far better now than they were a decade ago, and from lots of other solid state researchers. They are focusing on areas where current batteries really don’t work at first, particularly with small-scale medical implants that are matched with little energy harvesters.
There are other companies that could be possible matches, for sure, and most of the possible end users are experimenting with lots of different designs and technologies for solid state batteries… or, probably more accurately, sampling lots of designs that have come out of little R&D organizations and university labs to see which might be practical for them.
One company that I see mentioned a lot is Ionic Materials, for example, and their “pouch” batteries appear to be the ones that McCall used in the “shooting your battery” video examples in his ad (it looks like he actually just lifted the video itself, though I’m not sure)… but though they’re a fairly similar size to Ilika and may be larger in terms of the amount of money they’ve raised, they’re still venture-funded, with investments from lots of big names including Total, Nissan, Hyundai, Renault and Franklin Templeton. That’s probably a better initial funding strategy, frankly, than having to trot your CEO out to justify the long-term nature of your materials science R&D to small investors twice a year like Ilika has to, but venture funding wasn’t so easy 15 years ago when Ilika was getting started… and it doesn’t really mean that one of them (or the dozens of other early stage competitors) will “win.” Ionic uses a polymer, by the way, which is fundamentally different from the thin film batteries from Ilika, but there are plenty of companies working on both those basic material structures.
And Volkswagen made a bit of a splash recently by investing $100 million in Quantumscape, one of the battery companies backed by the billionaire folks at Breakthrough Energy Ventures, so there’s a lot of money floating around in this space — that means this one lithium solid state battery tech company just raised more in one deal than Ilika has spent on its R&D and development in a decade… which doesn’t mean it will “win,” of course, but does mean that there’s a lot of global money chasing the same basic idea.
Another to get some recent venture funding was Solid Power… and it wasn’t that long ago that Dyson got into the business in a high profile way with his acquisition of Sakti3, which has now been written off to a large extent… though Dyson is still apparently working on his secret electric car project and on solid state batteries. Also venture-funded in the UK is Superdielectrics, which is hoping to develop supercapacitors using specialized polymers for solid batteries… or maybe for faster charging stations. There are dozens more, and they all sound really cool.
Solid state batteries are widely perceived as being the next likely standard, whether that’s in four or five years or 15 years… but if it was at all obvious, even to insiders, which battery technology would end up being the best, or which patents would be critical, these would not be little independent sub-$50 million companies or venture-funded labs or university research projects… and if the auto companies or battery companies, which spend billions on acquisitions each year, are not sure enough of the winner that they’d just buy them out at a tiny price, well, there’s not much reason for us to be sure, either. Quantumscape apparently now has an implied billion-dollar valuation as a currently fashionable venture favorite, but there are lots of others who tried and failed to do similar things in the past decade, and plenty of others who are well funded and will fail — that’s just the likely long odds for a new battery technology, it’s hard to become a new “standard” and make it into commercialization.
But still, looking for winners is fun… and whether or not Ilika is actually McCall’s primary teased stock, I did find it interesting and could see myself gambling a little bit on their progress over the next 3-5 years. This is a stock that would probably require patience and a willingness to lose your entire investment… they do have some revenue, and it is growing, but it’s all for very early-stage work on low-volume products or prototypes, with the most advanced batteries (not for automotive, but for small sensors) likely to be in prototyping stage this year.
Whether they reach a large-scale commercialization agreement with anyone for any of their technologies or not is at best a coin toss over the next few years — and it would probably require a large-scale agreement to manufacture their batteries, and then also license those batteries to a substantial original equipment manufacturer, to really provide the sexy returns that everyone hopes for (most companies don’t build their own batteries, so they’ll need to partner with a battery company and the eventual OEM that designs the battery into some end product).
The stock could move on anything, of course, just having a tiny market cap with low volume means any bit of news or attention is likely to drive the shares in one direction or another… and I imagine there are plenty of frustrated shareholders who’ve been speculating on this “next great idea” for a few years, since the stock is down more than 80% from its 2014 highs (and in a fairly straight line, as revenue has been quite flat and they’ve essentially just been burning through research funding and grants and, occasionally, selling equity to raise more R&D money).
I’m going to be watching this one, partly because I like but haven’t bought any solid state dreamers just yet. If you’ve got any stocks you prefer in this space, or are better matches for the limited clues, well, feel free to toss ’em on the pile for our consideration — just use the happy little comment box below. Thanks for reading!