Today we’re looking at an ad about the “Super Crystal Solar Revolution,” which spools up a big surge of excitement about a new kind of solar cell that will change the world.
An extremely similar pitch, with all but the company-specific details almost exactly the same, was made by James Stafford and the Oilprice.com folks almost three years ago — that time it turned out to not really have a real connection to this “new solar” technology, that “death of solar cells” spiel was just a way to get attention.
Back in October of 2016, it turned out, they were using this “death of silicon” story to tease one of the YieldCo spinoffs in the solar space, a company called 8point3 Energy Partners (CAFD), and that pick never really took off as they hoped — the company got acquired about a year and a half later at a price about 18% lower than it was when it was first teased by Oilprice.com, and as a YieldCo it was primarily a financing company, they didn’t have any unique technology and, really, didn’t have anything to do with making solar cells at all.
Back then, they were selling subscriptions to a service called Energy & Resources Insider — it seems like they’ve probably replaced that with one that’s now called Global Energy Alert, which is what they’re selling today ($79/yr).
So the stock pick last time didn’t turn out to be a winner, but the ad must have “worked” to bring in new customers, which means that as so many publishers have done in the past, they took the “story” that worked and used it to sell a completely different stock. The copywriter dug in, re-used that headline and the “death of silicon solar cells” concept, and switched a few clues around to tease a completely different company.
Which begs the question… who is it? Have no fear, Gumshoe friends, we’ll dig in and sift through those clues and ID the stock for you… but first, let’s start you off with some of the “big picture” stuff behind this “death of silicon solar cells” story they’re peddling…
“Scientists and engineers have been trying to squeeze profitable energy out of silicon solar cells for 62 years.
“What they’re starting to realize is… as you’ll see in a moment… that’s never going to happen.
“When it comes to extracting energy from the sun – profitably – silicon is just not up to the task.
“Unfortunately, as things stand today, 90% of the world’s solar cells are made from silicon.
“But here’s where things are about to change in a big way…
“There’s a new element – what I’ll call a ‘super crystal’ – that will soon replace silicon, and transform an industry.”
So what is this “super crystal?” Here’s a little more about that:
“As the scientists at Lawrence Berkeley National Laboratory put it, this ‘super crystal’ has facets that ‘behave like billions of tiny solar cells, all connected in parallel.’
“MIT Technology Review says it will ‘far outperform silicon’.
“The World Economic Forum calls it a ‘wonder material’…
“Adding that it will, ‘transform the lives of 1.2 billion people.'”
What he’s talking about there are Perovskite crystals, which have the theoretical potential to reach something like 30% efficiency in transforming sunlight into electricity according to this article (though that same article says “in development” Perovskite solar panels are at 20% efficiency)… and yes, that top end would be better than typical silicon solar cells — right now the “world record” for silicon-based solar panels is 24% efficiency, and several of the top companies can put out high-end panels that have 20-24% efficiency with various different techniques and technologies.
These perovskite crystal cells can be made to be much thinner than conventional solar panels, and made more cheaply with common materials, we’re told, and the maximum theoretical efficiency is much higher — so there seems ample reason to be testing out this newer technology. And the technology has definitely advanced since the first version of this ad ran late in 2016, so there is some meaningful hope that more leaps forward will enable yet more (and cheaper) solar cells to be manufactured at some point in the future… though researchers haven’t yet solved all the scalability challenges or reached commercial production.
But what does that mean for us investors? Well, that’s when we get to the good part…
“There’s one little-known company at the center of it all…
“Right in the middle of what Navigant Research predicts will be a $134 billion market by 2020.Are you getting our free Daily Update
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“Now, I just got word that the very first big mutual fund has started buying shares of the company…”
And the ad shows an image, which looks to have been clipped from the Nasdaq’s data pages, listing that mutual fund investment (with the name blurred out, to make the Thinkolator work harder), and also the insider purchases made over the last two years — which will give the Thinkolator a little something to chew on.
And, we’re told, this company’s next quarterly release is “just a few days away” — so you have to “act before it’s too late.”
“You see, early investors in this under-the-radar company have a chance to get a whole lot richer…
“By our conservative research estimates: 20,280% richer.
“That’s enough to turn $10,000 into $2.02 million on a single trade.
“There’s no bigger prize in energy than harnessing the FREE unlimited energy of the sun.
“Solar companies have been trying – and have failed – to fulfill on this promise for decades.
“But they’ve been held back by silicon.
“For the first time ever, that’s about to change, and this one small company holds the key.”
OK, so we’ve got some insider purchases, a stock in the solar business, and some connection, apparently to this new perovskite crystal design for possibly newer and more efficient solar panels. And yes, other than the specific mutual fund and insider trades they hint at, all of that (including the 20,280% number) is exactly the same as the ad they sent out in 2016 teasing CAFD (I repeat that just to remind you that the numbers are made up, and the “$10,000 into $2.02 million” promise is NOT based on any kind of objective reality — if you claim the same exact potential for two wholly different stocks, years apart, then that’s not a “conservative research estimate,” you’re just making stuff up).
Is the perovskite crystal going to do to the silicon solar cell what the microchip did to the transistor? I would imagine that’s putting the cart a few miles ahead of the horse, but here’s a snippet about that efficiency weakness:
“At silicon’s absolute theoretical limit… it can convert 23% of the sun’s light in to electricity.
“But it took us 62 years to get anywhere close to that.
“The very best commercial thin film solar cells now convert just 20% of the sun’s light in to electricity.
“And until a few months ago, silicon was the best practical material we’ve had to convert the sun’s energy in to electricity.”
And we’re told that it took decades for Silicon to become 20-25% efficient in solar cells (the first solar cells were developed in the early 1960s), but that these “secret” Perovskite crystal-cells have leapt from 5% to 25% efficiency in just a couple years, and may shoot higher much more quickly.
I’m not sure this efficiency talk is entirely accurate, though perhaps the physicists in the audience will chime in — there is a theoretical limit for the efficency of photovoltaic cells, the Shockley Queisser Efficiency Limit, which is based on a formula that I don’t understand… and it’s really a theoretical single-panel, simple cell, pure and unconcentrated sunlight limit. Much of the reported super-efficient solar cells that you hear about from labs are based on multiple layers of solar cells within a panel to increase efficiency, or on multi-material panels, heat harvesting, sunlight concentration with lenses or mirrors, or other strategies to get beyond this theoretical limit — and there are lots of different materials that are used both in conjunction with silicon and in place of silicon that offer either increased efficiency or decreased cost or some other benefit.
So I can’t solve that for you, I just don’t know — it looks to me like these Perovskite crystal cells are a long way from becoming commercially competitive with silicon, just given the huge manufacturing head start that silicon has, but perhaps there really will be a rapid breakthrough, I don’t know. There’s an interesting quick article about Perovskite crystals as a breakthrough technology in Scientific American here, and there are some folks, like Lux Research, who believe that there’s a chance we’ll see meaningful commercial production within five years as academic researchers spin out their work to startups.
And, of course, I’m sure that there will be some of those startups or Perovskite researchers who end up being publicly traded companies… and those are bound to be the subject of plenty of future “teaser” ad campaigns from whatever newsletters are still around by then (and hopefully your friendly neighborhood Stock Gumshoe will be around to give some perspective). But as of now, there isn’t a commercial Perovskite crystal solar panel business… so what the heck is James Staffords talking about in his ad?
Back to the spiel… what is it that’s different about the teased company this time around?
Here’s how they sum it up in the ad:
“This stock has all of the hallmarks of some of the biggest winners of all time in the energy sector.
“It’s a cheap stock…
“It has a breakthrough technology…
“Insiders are buying it…
“They have a patent moat…
“And a big event that could soon propel it to the front page of every newspaper and news site in the world.”
Any details on that stuff? Yes, indeedy… we’re told that they have a “patent moat” of “650 patents granted and pending.” So that’s another clue.
And that they have a “secret partnership” with a US company — secret to everyone, they haven’t disclosed it… though Stafford says that the CEO told investors that they might be allowed to announce the partner on their next conference call, which is the catalyst they’re apparently using to make this an “urgent” pitch.
The partner, we’re told, is going to “pay to build their manufacturing” plant… and Stafford says that…
“I recently got hold of research from DeutscheBank… as well as Edison Investment Research… and two analysts believe this contract is with none other than Apple…”
So that’s the tantalizing dangle… little companies that get a huge deal with the world’s biggest consumer electronics brand can obviously go from zero to hero in moments, and investors know that. Of course, Apple is super-secretive, and the idea that they would “allow” an early stage experimental supplier to announce any kind of joint venture deal is hard to swallow, but I guess it’s not impossible.
And the clues about the “cheapness” of the stock sounded a little strange, so I thought I’d look into that… from the ad:
“…. this stock is cheap… in an unusual way….
“It trades on the London Stock Exchange… so not many people know about it in the states.
“Its currently trading for over $50 pounds — about $65 US — on the London Stock Exchange.
“But, here’s the secret…
“It also trades on the US market where no one knows about it… and you can buy it, right now, for under $3.
“This allows you to buy a good number of shares… so, over time, if the stock splits your holdings go up.”
That sounds like balderdash. Yes, companies can trade in both London and in the US, and sometimes you get a little bit of price differential if there isn’t much trading volume in the US markets… but the US and London markets are both very accessible to almost all investors, and any meaningful price differential can easily be arbitraged away at essentially no risk, thanks to those two hours or so every morning when both the NY and London markets are open simultaneously. If it’s trading at 50 pounds in London and $3 in the US, then I’m quite sure the stock is not the same.
But that does provide us with some more detail… so what’s our secret stock?
Thinkolator sez this is Nanoco Group (NANO in London, NNOCF OTC in the US), which actually did trade up to about $3 in a very brief spike last fall in the US OTC markets… but is now trading for about 50 cents. And it is indeed trading for about 37.11 in London now, down from a high in the 50s… so what’s the deal?
Well, the deal, as most investors could tell you, is that trading in London is not in pounds, it’s in pence — that 37.11 is in GBp (instead of GBP for pounds), and, like our pennies, each pence is 1/100th of a pound. So 37 pence is about 47 cents here on the left side of the pond at current exchange rates. That means the US shares are quoted at a small premium to the shares in London, which isn’t unusual if there’s a surge of demand for illiquid over-the-counter shares in the US, but the shares are the same whether you buy them in London or in the US.
That strange spike back in late October and early November that sent the shares briefly to $3 in the US was not mirrored in London, the stock did not surge like that at all in its home market, so it seems likely that was just a story-driven surge caused by a few folks who got enthused about the stock, probably placed “market orders” when the London market was closed, and got taken advantage of because they didn’t know enough to check the “fair” price in London before trading (always use limit orders when trading OTC stocks, and if the main listing where most of the volume in trading takes place is overseas, make sure to check the fair price before ordering — and don’t forget to convert the currency).
That spike died down almost instantly, and the total anomaly was only about 1,000 shares that changed hands at $3 and another 30,000 that were sold around $2 as it bounced up and down in the following few days, and then it mostly resumed its normal trading within a penny or two of the “fair” price in London. Which means it looks like someone ran a little “pump and dump” operation on a few unsuspecting speculators, to the tune of $50,000 or $100,000 dollars, and now we’re back to “normal” (I don’t know that this was “pump and dump,” of course, it could have just been news-driven nuttiness that threw the shares out of wack for a day). I’m not aware of any actual news that came at the end of October, and the London market didn’t reflect any real change, though the company did report its preliminary annual results (for the July 31 fiscal year) on October 16.
So get that $3 and the $65 out of your head…. this is a small company trading at about 50 cents a share, with a market cap around $150 million. It’s basically an R&D firm, they’ve never had a meaningful amount of revenue (they did see their best sales ever last year, after a multi-year decline from 2012 to 2017, but that was almost all from milestone payments and advances from partners… and it just means they’re losing $5 million a year instead of $15 million).
And this will probably not be surprising, given the tangential connection past similar ads had to reality, but it’s also not really a company that has any meaningful exposure to perovskite solar cells — or, frankly, to the solar power industry at all. Nanoco is really primarily a supplier of components for displays, or at least that has been their focus in past years as they tried to get a commercial supplier to adopt their technology (cadmium-free quantum dots) instead of conventional OLED screen technology.
Maybe that’s not fair — they do list solar as one of their “big four” markets (the others being display, lighting, and biological imaging), the goal there is to sell printable inks, using their nanomaterials, but I haven’t seen any mention of that being a meaningful part of their financial performance so far… all the deals and projects they actually talk about are in electronics, primarily display materials and microdisplays.
The big “mystery” with Nanoco that got everyone excited was indeed that unnamed “U.S. Customer” that is bankrolling the expansion of their Runcom plant and agreeing to buy a substantial amount of product. I have no idea whether or not it’s Apple, though that has certainly been the speculation. If so, I’d assume it’s for microdisplays, maybe for augmented reality, but it could be anything… and at the scale Nanoco is capable of and that is being funded by this initial investment, it would almost have to be an early stage exploratory project — either a new device, or an experiment to make cheaper LCD screens using Nanoco’s quantum dots instead of having to use OLEDs — Apple has certainly spent $20 million+ on experiments and possibilities that don’t go anywhere, so I’d be careful about assuming too much about the blue skies ahead with this particular mystery project (though it is, at least, helping with cash flow). The mystery customer very likely has absolutely nothing to do with solar panels or energy at all, it’s much more likely to be display-related.
Nanoco says they’re being careful about costs, and their revenue has certainly climbed thanks to some joint ventures with chemical and display companies, but they don’t appear to be particularly close to break-even on a cash basis. My assumption is that they need to raise cash fairly soon — as of their last report, for the six months ending in January, they had about $8 million in cash on hand… and their cash burn is not particularly consistent, presumably because some of their revenue is “lumpy” from R&D or joint venture financing of one sort or anohter, but that’s not likely to be enough cash to get them through another year, even with the recent trend for more discipline and cost cutting in their operating expenses and R&D.
That can always change, of course, and I don’t know anything about the compapy’s internal operations… might they have some big bolus of cash coming in? Or might they be chatting up newsletters in an attempt to drive the share price higher, which would allow them to raise money at a higher price? Your guess is as good as mine.
But yes, Nanoco is the stock being teased — the clues are all perfect matches, though it’s important to note that since the purchases noted by a few insiders there has been some pretty heavy insider selling — including the CEO selling almost two thirds of his shares a few weeks ago. The mutual fund that has bought shares is the Tanaka Growth Fund (TGFRX), Tanaka reported owning 3,091,377 shares of Nanoco as of December 31, as teased in the ad, though the more recent March quarter number dropped slightly to below three million shares — it’s still a top-ten holding in that fund, though the fund has trailed the market pretty dramatically over the past four years.
The analyst forecasts from Edison are indeed real, though they’re also paid for — Nanoco is one of Edison’s research clients, you can see the page of info they host here, and their research coverage was commissioned by Nanoco. Edison charges companies up front and says they don’t promise positive coverage… but they are, obviously, incentivized to keep paying clients happy.
And that’s all I’ve got for you on this sunny Wednesday — so I’ll turn it over to you… think Nanoco is worth a tumble for the potential of their R&D advancing into commercial projects next year, or that those commercial projects will grow large enough to be financially viable? Excited about this “mystery customer?” Worried that they’ve promised much the same thing with different display companies over the years, with little progress? (Nanoco started trading almost exactly ten years ago… and there have been ups and downs, but you can buy it today at about the same price it traded at a decade ago.) I expect this one would require some patience, but it’s certainly small and focused on promoting itself, so one never knows.
The happy little comment box awaits below… whaddya think?
Disclosure: Of the companies mentioned above, I own shares in Apple. I will not trade in any covered stock for at least three days after publication, per Stock Gumshoe’s trading rules.