This article was originally published on May 19, and the ad we’re covering has been heavily promoted over the past month, leading up to a big final push before yesterday’s supposed catalyst date of June 13, when Blanco (or his ad copywriter) was certain that Apple would announce some big news about “this tiny company”. So far, it hasn’t gone well over the past 24 hours for that teased stock, which turned out to be Energous (WATT)… probably mostly because the ad was so heavily circulated that it set up wildly inappropriate expectations for a not-ready-for-prime-time technology.
The article below has not been updated since May 19, but I have added an extra P.S at the bottom to show what an overhyped catalyst that turns out to be an empty promise can do to a small cap stock.
You very likely already know the solution to this teaser ad — it comes in from Ray Blanco, and it’s an ad for Agora’s Microcap Millionaires. In case you get confused, that’s not the same as the Microcap Millionaires service at microcapmillionaires.com — Agora Financial’s offering is a “small cap” stock newsletter, microcapmillionaires.com looks like it’s a penny stock trading service from a one-guy operation. Agora Financial’s Microcap Millionaires is edited by Greg Guenthner these days, it’ll run you $5,000 a year if you choose to subscribe, and apparently Ray Blanco provides some of the technology research or analysis.
So what is it that they say is the “Deadly Flaw” in every smartphone, tablet, etc. that’s put out by Samsung, Apple and everyone else? And what’s the company who can “expose” (and presumably profit from) that deadly flaw?
Well, we’ll be a bit uncharacteristic and tell you part of the answer up front (I know, that’s not very sporting)… they’re saying that the “deadly flaw” is that all these portable devices use batteries, and the batteries don’t last long enough and have to be plugged in to be recharged.
Which means, of course, that the “No-Name Company” who can expose this deadly flaw and solve this problem for the world is a company that provides wireless charging… which, these days, is almost certain to mean that you’re hinting at Energous (WATT), the interesting, promotional, and very much pre-commercial wireless charging technology company.
That you could have guessed almost from the first moments of the ad… and you’ve probably seen several articles we’ve done before about Energous, because it’s been teased by a few different newsletter blokes over the past year or so. But let’s look at the promises in the ad, double check that we’re right about the company they’re teasing, and see if there really is anything to this 80,000% gain promise, or the “back-room deal” that’s going to hit the headlines on June 13 and send the stock soaring.
Ready? Here’s the first part of the ad, just so you can see how intensely they’re emoting about this pick:
“On June 13th, This No-Name Company Is Set to Expose the #1 “Deadly Flaw” in Every Single Smartphone and Tablet on the Planet…
“(And Tee This Bleeding-Edge Industry Up for a 79,900% Multi-Year Tear)….
“… one California whiz-kid cracked a 117 year-old technology riddle (and uncovered a crippling “defect” in Silicon Valley’s “smart device” empire…)Are you getting our free Daily Update
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“Unleashing a brand-new high-tech sector that has Goldman Sachs, Vanguard and Morgan Stanley betting millions… Google and the U.S. Government scrambling to play catch-up…and whispers of a shocking back-room deal that’s poised to hit the headlines in precisely 38 days…
“Setting the stage for YOU to capture ‘ground floor’ gains in a sector projected to grow 3,170% over the next 8 months… 10,140% over the next 3 years… and nearly 80,000% in the long run.”
Notice how it’s the “sector” that’s expected to grow 3,170% over the next eight months… whatever that means, and that they aren’t technically promising that this company will go up 80,000% in the long run. Which is probably smart, and perhaps part of the reason why the ad made it past Agora’s lawyers. But certainly the implication is there — there’s a “shocking back-room deal” that is going to hit precisely on June 13, and it will make you filthy, stinkin’, Scrooge McDuck rich.
And yes, the ad is very much about wireless charging — but, as is the case with many newsletter pitches, they tee up an impressive sounding environment, with huge growth potential and a great many big-brained (and big walleted) participants, and then imply, ever so softly, that this “one little company” is the key to the whole thing.
Which often turns out to be hooey, of course. But let’s see what they say for this one…
“… when it comes to picking the right horse in the race for tech’s actual ‘Next Big Thing’, I’m going with the kind of technology that has:
“The brain trust at Google working overtime to incorporate it into their infamous ‘self-driving car’ skunk-works project…
“A research team at Stanford University radically re-imagining “new ways to treat illness and alleviate pain”…
“The bureaucrats at the United States Department of Energy investing millions of dollars in research, breathlessly declaring: ‘Just as Wi-Fi has freed consumers of wires when accessing the Internet, technology may soon be widespread.’
“And more to the point of today’s discussion…
“That’s why I’m convinced that this tiny ‘Wireless Charging’ pioneer will see 32-fold growth over the next 8 months…”
OK, so Ray Blanco is really pitching 3,200% growth for this company by next Winter. That could still mean more than just “stock appreciation” — it could be “revenue growth” or something like that (sometimes companies can post absurd growth numbers when they first transition from making nothing to making a little something).
Those other examples, though, are not specifically related to WATT — WATT is trying to make small devices receive a power “signal” that they liken to WiFi over longer distances (as in, at least several feet — not the 5-millimeter distance that might work for a charging pad)… those examples cited are generally about close magnetic field based-recharging for electric cars, though the Stanford one is about short-distance charging of embedded medical devices. I don’t know if the patent worlds of these different kinds of charging will collide at some point or not.
More from the ad:
“… just like wireless internet uses radio frequencies—or waves—to keep you connected no matter where you are…
“‘Wireless Charging’ promises to keep all your gadgets running…all the time…without a single cord in sight.
“Actually, ‘promises’ may be the wrong word.
“Because as Michael’s business partner explained to a crowd of well-heeled businessmen and industry insiders on May 12, 2015…
“At an elite ‘invite only’ conference on a mild Los Angeles Tuesday…
“Their company wasn’t in the business of ‘promising’ a blockbuster technology.
“It was in the business of delivering one.
“And if my research is correct…
“Their work is about to be your windfall.
“100-fold growth over the next 3 years…”
“They’ve FINALLY made wireless power commercially viable.
“Meaning they can beam power, at meaningful distances, to multiple devices, in a completely safe, shockingly efficient manner…
“And you can get out in front a market with a over a century’s worth of pent-up demand.
“With airtight patent protection and a hard-earned reputation as the only ‘Wireless-Charging’ company EVER to demonstrate the technology successfully…
“It’s no surprise that this ‘pure-play’ stock has already quietly received a few serious votes of confidence (most notably in the form of “innovation awards”) from industry observers.”
That seems to generally be true, though the demonstration was a year and a half ago and Ossia’s somewhat similarly capable Cota system was demonstrated this year at CES. The actual commercial wireless charging systems that are available now (and have been for quite some time) all require either contact with or very close proximity to the charging source or mat (within a couple centimeters), and the demo that Energous did back at the Consumer Electronics Show in the winter of 2015 showed the potential of an in-home charging network that they liken to “wifi for electricity” … but that potential is still quite a ways from being realized. And whether WattUp from Energous is really “ahead” of the Cota because they demo’d it a year earlier is an open question for me, I have no idea — both say they’re commercially viable, neither is commercially available (but only WATT is publicly traded, of course, so if you’re going to promote something to sell an investment newsletter that’s got to be it).
Blanco’s vision is that all appliance and “box” makers will begin to include a wireless charging “transmitter” module, so your refrigerator and your toaster will be able to transmit power, and that portable devices that you want to be “wireless” will have “receiver” chips that capture that transmitted energy and use it to charge their batteries…. and he says that’s his “best guess for two years from now.”
That seems wildly, wildly optimistic to me.
The big push, if it ever comes for Energous, will be when (if) their technology gets built into a beloved high-volume product and thus helps their technology to become the accepted “standard” that other manufacturers will want to follow. The holy grail in this department is, of course, the iPhone — and it was iPhone “wireless charging” rumors (first really reported by Bloomberg here) that drove Energous stock higher after it bottomed out in the January doldrums earlier this year.
The stock has been relatively tepid since that huge run from $4 to $11, and the company has shifted focus away from providing wireless charging chips (and transmitters) for smartphones in the near future as they concentrate on the market for distributing power to little “Internet of Things” sensors and devices.
They have announced a mini-transmitter as well, something that you can plug into a USB port and use to generate a power “signal” to charge your wearables or whatever else has one of their power receiver chips built in, but the company is talking about this as their “gateway” product — the one that gets them to the point of generating revenue faster. It’s not particularly revolutionary in concept, since the small and low-power design means you lose, at least in this first iteration, the “charging at a distance” capability… these mini WattUp transmitters will charge your wearable device, but the device has to be sitting on the charger or within a couple millimeters, very similar to existing charging pads or magnetic chargers like the Apple Watch uses. It would have the advantage of getting a receiver “chip” into those wearable products, and that same receiver is expected to work with whatever longer-range transmitters Energous is able to commercialize at some point in the future for their more ambitious goal of charging your phone while you walk around with it in your pocket at a distance of 10 or 20 feet from the transmitter.
Building a base of installed devices that helps to create demand for more transmitters and more devices is how they hope to build a standard around their designs that creates commercial acceptance… though they’re also part of the AirFuel Alliance that’s trying to develop broader design standards for several different kinds of wireless charging, and I don’t expect we’ll know for quite some time where the weight of important patents lies in this area (WATT certainly has registered a lot of patents, though they’re not the only ones).
So that’s the longer-term promise, that Energous could “own” wireless charging and be the standard as it takes off in a few years with wide acceptance… but the near-term story of Energous as a widely-touted stock is that rumor that Apple is going to partner with them for their wireless charging solution in the 2017 iPhone (or 2016 even, if some touters are to be believed). Here’s Blanco’s pitch on that aspect:
“… put a big, red circle around June 13.
“Because that’s the day I’m expecting Tim Cook, the CEO of Apple, to walk onto a stage…
“Make quick announcement…
“And send this 1 no-name technology stock on a mind-bending, multi-year tear.”
He cites some headlines, including that Bloomberg article mentioned above as well as stories like this one in Computerworld, which does a good job of summing up where wireless charging is right now (but fails, of course, to claim that Apple has chosen one particular partner or standard… which makes sense, since Apple feels strongly about secrets).
And Energous does seem to be the company that has most publicly stated that it’s closest to commercial launch for their products, though I don’t know if that means they’re really in the lead — companies that aren’t public don’t have to be as promotional. If they’re big they can afford to keep secrets for competitive advantage, and if they’re small they just have to have venture capital funders who are excited about the potential. The other two widely-discussed longer-distance wireless charging companies are Ossia (focused RF beams at low power) and Ubeam (ultrasonic), both of which are well-funded but private, and it’s exceedingly likely that Apple and Intel and Qualcomm and a dozen other big guys are actively (and mostly secretly) experimenting with the next generation of wireless charging (Apple even “stole” a couple Ubeam engineers last year). There are no doubt lots of smaller projects under the radar as well — there’s one called MagMIMO that’s quite similar to Energous’ technology and was developed a couple years ago at MIT (it’s now a “stealth” company called Pi, so they’re probably commercially far behind Energous and Ossia, but you never know).
But I risk getting into a lot of repeating myself here, since I wrote about Energous when it was teased by a different newsletter last month. At the time I was very skeptical that there will be any imminent Apple announcement about using WattUp in the next generation iPhone (getting it into the iPhone 7 this year would be all but impossible, but next year is what the slightly more sober touters are promoting), and I’m still skeptical. It’s a cool technology being demo’d and investigated by at least a few “Tier 1” partners, but nothing I read makes me convinced that it will be in anything more than a couple small-volume wearable devices by a year from now.
Doing better than I expect is possible, of course, and WATT is still a very small company with a market cap of about $150 million — so any good news, or even another, stronger rumor about Apple could send them soaring…
… but that comes with a flip side, too, if they don’t generate some revenue toward the end of this year, and if Apple or another major partner isn’t announced, investors could give up on the shares in a hurry. Heck, since Agora Financial is pushing this June 13 date we might even see people react more quickly — investors who don’t hear anything about a deal by then, or who get inklings that Apple is using a different wireless charging technology or eschewing wireless charging entirely for the iPhone 7 or next year’s 7S could be sorely disappointed — and disappointed investors take out their anger by selling shares.
So if you do ride with WATT, be prepared for some bumpiness. And Energous has only enough cash to get them to about October 1 if their spending remains about like it was in the first quarter, so they’re probably looking for opportunities to do a stock offering. If I were their advisor, I’d tell them to talk to reporters every second they can and raise money now, when investor optimism seems pretty high… and they are making the rounds of investor conferences this month, so perhaps that will come soon.
If Apple is convinced that WattUp is their savior technology and the clear choice for wireless charging, they could just buy WATT — even if they paid double the share price that would only be $300 million, about as much profit as Apple generates in two days. (Apple doesn’t often buy out their suppliers, they’d rather squeeze them… but they do often “buy in” smallish technology companies to get their designs and engineers.)
WATT reported their first quarter last week, and that provided a bit more of an update on their expected timelines: They say the “midsize” transmitter should be approved by the FCC in time to be available by the third quarter of 2017 (that’s the one that you could put in a desktop computer or car, and it would charge devices within 2-3 feet of the transmitter), and the full-size transmitter that they demo’d at CES in January 2015 is “targeted for integration into partner products as early as the end of 2017.” So that pretty much rules out the iPhone before 2018, I would guess, since it seems extremely unlikely Apple would risk the iPhone on a power transmitter that isn’t available at the time the (hypothetical) iPhone 7S is completing its final design and manufacturing plan by the Spring of 2017…. though I suppose it’s possible that Apple could adopt the “MiniWattUP” contact charger for next year’s phone if it’s available (I wouldn’t expect it, but I’m often wrong). In the past, Apple has, or so rumor has it, been much more likely to take out a “not ready for prime time” feature from the iPhone at the last minute before manufacturing begins than they are to add a new technology at the last minute.
The first versions are likely to be disappointing, as first versions so often are, and Apple waited several years before it even put NFC chips in its phones… and outside of the Watch it still hasn’t adopted the widely-available wireless charging (with mats or the like) that has been available and used by big competitors like Samsung for several years. It hasn’t hurt them, Apple still gets way more than their share of the profits in the mobile phone business… Apple doesn’t have to be first, but they really focus on being right and making sure the design and use is as seamless as possible. If you’re convinced that will end up meaning that the WattUp from Energous makes it into the iPhone over the next few years, then you’re further along in your thinking than I am — I’d be delighted to hear your thoughts, just use the friendly little comment form below.
P.S. I forgot to mention that yes, June 13 is a real date — Apple holds their WorldWide Developers Conference (WWDC) starting on that date, and they often use the keynote to introduce new products or software. They probably will announce some new “surprising” stuff on that day in their product lineup, and some of the folks who make their living speculating about Apple rumors are talking about the possibility of some sort of wireless charging being mentioned (though most seem to indicate it’s a “2017 at the earliest” thing, so any mention at a developers conference this year would probably be pretty tepid… unless they’re ready to launch a real surprise and shock us all). We’ll see.
P.P.S. Your June 14 update… another warning to be careful about relying on made-up catalysts that are ginned up to convince you to subscribe quickly to a newsletter. People tend to really fixate on those catalysts, even if they’re nowhere near as certain as the newsletter would like you to believe, and for big newsletters that get a lot of subscribers and attention the impact on a stock can be substantial… here’s what happened to WATT stock during and for 24 hours or so after the WWDC. (It got to $14.50 or so just before Tim Cook took the stage yesterday, and bottomed out near $11 in busy trading this morning):
Doesn’t necessarily mean anything different about WATT long term, since I think most sober analysts believed that the probability of Apple putting it in their next iPhone was pretty much nil anyway, but when you’re trading on future hopes and don’t really have a commercial-scale business yet, there are no fundamentals to tie the stock to so the story is everything.
I’m just as skeptical of WATT as I was before, and still think they’re at least as likely to have bad news as good in the next six months (big capital raise, continued delays in product development), but at least the price has come down a bit. Not all the way — the very non-specific Apple wireless charging rumors started on January 29 when the stock was below $5, if you remember — but part of the way.
So now… we’re back to this being a story about Energouos and their much smaller-scale early-stage potential partners instead of a story about Apple’s WWDC conference. Whether the stock hits $5 or $15 next, I have no idea… but if I were forced to bet today I’d bet on the price falling.
Disclosure: I own shares and/or call options on Apple and Google/Alphabet. I am not invested in any other company mentioned above, and will not trade in any covered stock for at least three days after publication per Stock Gumshoe’s trading rules. I did have a position in Energous put options for a week or so leading up to the WWDC announcement, but have sold that position.