Today I’m working on a stock of questions I’ve gotten about the latest pitch for Tim Bohen’s Penny Stock Letter ($79/yr). The teaser ad carries an April 2020 signature line, and most of the copies of it that I’ve seen were forwarded our way during the past two weeks.
And the stock is apparently tiny and has some kind of Apple and 5G connection, so some of our readers got excited quite quickly — here’s some of the tease from Bohen’s ad:
“… when I discovered this tiny company…
“Its potential connection to Apple’s big 5G rollout…
“And the fact that it’s trading for just $4…
“I knew I had the opportunity to help hardworking Americans.
“So what I did was create a brand-new newsletter.
“One that’s totally separate from my special network of millionaires… and allows me to focus on these types of cheap stocks that have the potential to explode.
“In this newsletter, I publish all my best research once a month.
“It’s called The Penny Stock Letter, and it has research designed to help you make some quick money.”Are you getting our free Daily Update
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OK, so that’s not really true — The Penny Stock Letter existed before this teaser pitch was sent out, whether that was April or May, and in fact we sleuthed out a teaser pitch from them back in November of 2019, that was for Unity Biotechnology (UBX), which I wrote about here, and that same pitch is still lingering on in this current ad. As with many newsletters, they’ve turned that past recommendation into a “bonus report,” this time called “How to Amass a Retirement Fortune from the Biggest Medical Breakthrough in History.”
And in case you need one more reason to be skeptical about the made-up deadlines that newsletter flacks use, since there’s just such a deadline date in this current ad, Unity was teased as being about to skyrocket on a particular date — they said that “its November 7th announcement could shock the world and start a historic 7-figure market sprint, unlike the world has ever seen…”
In that case, it was a relatively uneventful quarterly earnings release they used as their deadline, and, as you might guess, it didn’t mean much — Unity Biotechnology today is trading within about 5% of where it was on November 7.
I say that just to insert into your noggin the reminder that deadlines and “starting on” dates for predicted massive stock surges are often added to advertising copy not because the editor has any great conviction about that date, or even because there’s a real catalyst of some kind coming, but because ad copywriters know that dates and deadlines are crucial both to helping you imagine your flow of incoming riches, and, perhaps more importantly, to getting you to pull out your credit card NOW, without pausing to think it over.
So now, perhaps, our melons will be slightly more ripe to the possibility that we’re being hoodwinked about the urgency of this pitch, which seems to be built around the tangential connection to Apple and the promise that the next iPhone introduction will be the beginning of this little stock taking over the market. So we’ll start off with a “probably not” mentality, just to be safe.
Doesn’t mean the stock he’s teasing is good or bad, just that we should get the “buying a Ferrari by Thursday” dreams out of our head before we think about the stock. Go into a new recommendation a little skeptical or cautious, without preconceived notions of riches, and your grandchildren will thank you.
So with that old fuddy-duddy advice pre-loaded for you, what’s the stock? Back to the ad for a little more info on this “supplier”…
“… let’s be honest, if you haven’t made money holding overpriced tech stocks…
“Don’t get discouraged.
“They’re just too darn expensive for the average guy.
“But I’m not writing you this letter today to trash big tech companies.
“Instead, I’m writing because I’ve uncovered the biggest tech opportunity of 2020.
“It’s a tiny supplier trading for just $4…”
So what does this little company supply? Apparently they provide some add-on technology or a new design for semiconductor fabrication. Here’s how the ad puts it:
“Manufacturers can no longer meet the very basic requirements of reduced cost, faster speeds and lower power consumption.
“And it’s shutting down the supply chain for EVERY portable electronic device on the planet…..
“The smaller the component, the more power is lost from leaks.
“And to make things even more difficult…
“All this lost power occurs at the atomic level.
“It becomes a quantum physics problem due to the size of the transistor.
“To solve that, what this tiny company created is…
“A single layer of oxygen superimposed in silicon.
“In other words, a superlattice using nanotechnology.”
Well, sure, obviously its a superlattice. Saw that coming 🙂
And apparently Apple’s gonna need this superlattice for their next iPhone…
“September 8th could serve you up a million-dollar slice of American pie.
“That’s because there’s something very special about this supplier.
“Just 12 miles south of Apple’s brand-new $5 billion campus lies this very plain looking two-story building.
“And tucked away inside one of the offices…
“There’s a small team of professionals working on the biggest tech breakthrough in the last 50 years…..
“I expect every tech company will have NO CHOICE but to adopt this technology.”
And what’s that Apple connection? Well, really, it’s a Qualcomm connection — Qualcomm will be providing the modem chips for Apple’s first 5G iPhones, and apparently Qualcomm will be using this latest technology in some way… per Bohen:
“I stumbled across a document I’ll bet hardly anyone even knows exists.
“Identifying this tiny company as a supplier to Qualcomm, the chip manufacturer.
“And according to my research…
“Qualcomm is the only company supplying 5G chips and modems to Apple…”
And he draws the line specifically tying this company to Apple and the hotly anticipated new iPhone:
“I expect three very important things to happen this September 8th:
“1. Apple will reveal their brand-new 5G iPhone to a room packed with tech bloggers, photographers and fanboys. I expect this to happen at their new $5 billion campus.
“2. Second, as soon as Apple unveils their flagship 5G iPhone… and reveals the technology driving it… I expect news of the technology behind it to hit every media outlet, news station and tech site on the planet. There’s no telling how high this $4 supplier could go.
“3. And last but not least… I expect Apple’s devoted fans to line up like sheep for the first 5G-capable iPhone… and buy up every last one… pushing shares of this tiny supplier even higher in the coming months.”
Recent updates anticipate that the next iPhone might be delayed a month or two thanks to coronavirus hiccups in the supply chain that will slow down the ramp up in manufacturing that would ordinarily be starting up several months before the product launch, but most analysts expect that the phone will probably still be introduced in September even if volume shipments are pushed back to October or November.
That’s neither here nor there, though, we could certainly wait an extra month or two for our million-dollar payday, right?
And the ad includes some quotes from other sources to buttress the claim that this is big news…
“The Telegraph says it will ‘Usher in a new era in computing’
“InfoWorld confirms it’ll give us: ‘[Computing] performance for another half-century’
“Extreme Tech says it’s nothing short of revolutionary… ‘This invention, if successful, could significantly impact the future of copmuting. True breakthroughs in computing don’t happen very often. When they do happen… it’s the result of years or even decades of work.'”
This has certainly been a popular stock coming out of the coronavirus crash and recovery, and it is technically possible that this might have been the first pick of The Penny Stock Letter back in the Fall of 2019, since it was also trading around $4 back then, and maybe it’s just being re-recommended here (the ad is dated April 2020), I don’t really know.
But anyway, yes, we can confirm that the stock they’re teasing is Atomera (ATOM), and it is no longer at $4 a share — a strong few weeks, even including a secondary offering at $5 a share two weeks ago, has the stock above $8 a share. And it’s presumably some 5G enthusiasm coming in there that’s helping, along with just the general “everything’s fine now!” enthusiasm in the market for little growth stocks, but I expect that this teaser campaign, run through most of the Agora newsletter lists, has a lot to do with that surge. The ad itself includes a “it’s already up 60% this year” chart that perfectly matches ATOM’s share price… as of February 20, when it was at $4.70 or so.
And that generally means we should be a little careful even if the idea seems compelling, since small-cap stocks that climb largely because of new newsletter attention tend to fade away a bit once that attention moves on to the next hot thing. You can never really tell what’s driving the share price in the short term, not with stocks like this — they have essentially no revenue and no analyst coverage, so we’re all just guessing, and the stock moves up as new investors hear about it and get excited by press releases about newly signed customers… or down as existing investors hear weaker-than-expected news about new licensees or future commercialization and give up.
That offering raised them about $10 million in cash, so they are in reasonably good shape on that front (there had been some worry about their “cash burn” before that, since they’re not likely to be generating any positive cash flow for at least a year or two so they were down to about a year’s worth of cash before the offering), but as to what the future holds, well, you’ll have to do some guessing.
Here’s how Atomera describes itself:
“Atomera Incorporated is a semiconductor materials and intellectual property licensing company focused on deploying its proprietary technology into the $350+ billion semiconductor industry. We have developed Mears Silicon Technology™ (“MST”), which increases performance and power efficiency in semiconductor transistors. MST® can be implemented using equipment already deployed in semiconductor manufacturing facilities and is complementary to other nano-scaling technologies already in the semiconductor industry roadmap.”
And how they describe their technology, in a little more detail:
“Mears Silicon Technology is a patented, quantum-engineered material which can enhance transistors to deliver significantly better performance in today’s electronics. MST is an ultra-thin film of reengineered semiconductor that incorporates layers of non-semiconductor material. This engineered silicon lattice has unique electrical properties which address several key device engineering challenges the industry currently faces as it seeks to reduce costs and lower power consumption. That means consumer electronics, such as mobile phones can have longer battery life, IOT devices can be made smaller, and cloud computing will become even more powerful.
“Manufacturers can address their yield, power and performance challenges at a fraction of the cost of alternative approaches. Atomera breathes new life into semiconductor fabs by providing up to a full node of performance benefits to existing fab processes, empowering competitive new product designs in existing fabs. Atomera’s patented material technology enables more efficient and better controlled current flow, leading to dramatic improvements in device performance and power efficiency”
So I guess it’s fair to say that this is indeed one way for chipmakers to push beyond the limits that Moore’s Law is facing — it’s no longer really feasible to continue cutting the size of transistors by 50% and doubling their efficiency, as has been done every 18 months for decades now, mostly just because electrons can’t be made smaller… so this technology tries to increase effective current flow and cut into power leakage while lowering costs (or improving performance).
In reading through much of their production materials, the appeal looks to be partially that this can extend the life of “older” technologies for foundries and making higher-cost cutting edge 7nm or 10nm processes less critical, and partially that they can license it to new waves of analog semiconductor designers to make even their cutting-edge products a little more efficient or a little smaller.
But I am not at all an expert on chip design, and I could be misunderstanding the basic premise here — please do peruse their materials and check it out for yourself. Here’s how IEEE Spectrum described it a couple years ago:
“The company has developed a single technique that boosts the speed of transistors, lessens the variability between devices on the same chip, and improves the reliability of those devices by keeping them in a youthful state. Atomera expects its technology, called the Mears Silicon Technology (MST), will give chip designers an opportunity to improve their systems without taking an expensive step toward a smaller transistor technology. Consequently, it might allow older semiconductor fabs to stay in production longer. Atomera is even working with leading chipmakers to show a benefit for the most advanced transistor geometries.
“‘Basically, the technique involves burying atom-thin layers of oxygen just below the surface of a transistor’s silicon. This makes the device better in several ways without interfering with the device’s operation,’ explains Robert Mears, its inventor. ‘You retain the silicon’s crystalline properties but give it a nudge in a particular direction,’ he says.”
And though Robert Mears founded the company 20 years ago, it’s still true that ATOM is quite young as a real business, and has almost no revenue, so for the foreseeable future the story is going to be all about how many partners they’re bringing on, and whether or not those partners are actually going to commercialize the product at scale and generate meaningful licensing revenue and royalties for Atomera.
As of the first quarter report (on April 30 — conference call transcript here), they said that they have 19 customers and 26 “engagements”, and that they’re working with 10 of the top 20 semiconductor makers. All of their current revenue comes from engineering fees and payments for setting up and consulting on the technology, they have not yet moved on to the really promising high-volume work that would generate big licensing fees (installing their deposition equipment into production lines at their customers fabrication facilities, and collecting licensing fees for integration, manufacturing and distribution, and then royalties on the end product).
Which most likely means that the iPhone will not incorporate chips that are built with MST technology from Atomera. Anything is possible, I suppose, but from what I can tell there are not yet any commercial-scale licenses for this technology being integrated into major production lines… and it’s hard to imagine a major company risking a key product launch on a new technology that hasn’t yet hit maturity. That doesn’t mean Atomera can’t be successful, but it means I’d hold off on assuming that you’ll be seeing licensing fees flow through this year on 100 million 5G iPhones.
Being a licensing company with an important technology or design that large companies can leverage is indeed lucrative — that’s what led to the huge success of UK chip design firm ARM Holdings in decades past (Arm eventually got bought out by Softbank), and, indeed, licensing still generates the lion’s share of the profits for Qualcomm thanks to their many patents on wireless technologies.
Will those technologies be important or critical for chipmakers? I can’t really tell you that — they are making some progress in getting their technology adopted, but it has been slower than investors expected and much of the news about the progress of those earlier-stage licensing deals is inscrutable… it’s hard to know whether chipmakers are experimenting with it, thinking about using it in a limited way, or maybe on the way to adopting it for huge cash-gushing production runs. Though it would be a little bit surprising if Atomera turned out to have a hugely critical technology and yet hadn’t been taken over by a major chip industry supplier like Applied Materials (AMAT).
If you’d like to follow up, I can at least tell you what some of those other sources are…
The Extreme Tech article quoted is “Why one small company thinks it has the key to extending Moore’s Law” — and that report is from 2016, when Atomera was brand-new to the public markets (they had their IPO in August of 2016, and this week is the first time since the initial IPO surge that the shares have been above that $7.50 IPO price).
The Telegraph article quoted isn’t specifically about Atomera, but is about the end of Moore’s Law in general and the potential of other technologies and work to fuel the next wave of advancement, from just increased hardware and software efficiency to quantum computing.
And the InfoWorld article quoted, “Beating Moore’s Law: Scaling Performance for Another Half-Century” is also not about Atomera specifically — it’s a sponsored piece from Intel that promotes their design and programming tools as a way to take advantage of parallel computing and thus bring more processing power to play despite the fact that Moore’s Law has hit a physics speed bump (or wall, perhaps).
So what progress is Atomera making these days? Atomera was actually also teased by Micro Cap Advantage last fall and I wrote about it at the time, which I didn’t remember until I looked back through my records, and I said much the same thing back then that I’m saying here. At the time that was a pitch that licensing revenue would be flowing through by January 7, which didn’t really happen, but are things looking up now?
The ad hints at some revenue coming in through licensing…
“Through careful research, I was able to discover a publicly available document…
“Linking this tiny company to a signed deal…
“With not one, but two MAJOR hardware manufacturers.
“This document confirms the technology is about to hit the assembly line for mass production.
“In the tech industry, we call this an ‘integration license.'”
That partially blurred out “publicly available document” is actually just the 8K Atomera filed with the SEC when they posted their quarterly press release last August. They did generate a little revenue, $70,000, so they were getting some licensing fees at that point but it wasn’t really new — they had the same level of revenue a quarter earlier, and the revenue line has waxed and waned a but but remains largely meaningless so far (it got up to $254,000 the following quarter, but as of the first quarter of this year it was back down to $62,000… which I’d say is is shorthand for “no big integration deals have led to meaningful production yet”). They did have “integration” deals with about a dozen different customers (that’s what they call “phase 3” in their presentations, which is the last phase before Customers actually install it and qualify the technology on their own equipment), and that number has fluctuated up and down some but is now at 16 per their Q1 2020 presentation.
The ad says that…
“… both these companies have likely already written a check…
“Turning this small research firm into a licensing firm…
“With cash already in the bank.”
Yes, they’ve gotten some licensing fees from these “phase 3” integration projects. No, it isn’t a meaningful amount of revenue… and they have guided to zero revenue in the second quarter, thanks to the slowdown of some of their customer projects due to the coronavirus. Whether revenue becomes meaningful at some point in the next year or two, I have no idea.
And that’s about all I can tell you about Atomera… they’ve mostly been a quiet technology story for a couple years, hoping to get the slow-adapting world of semiconductor tooling and processes to adopt their new technology, and it hasn’t happened yet. They are still making some progress, but they’re also really careful not to talk about timelines other than to say that their customers have slowed down a little bit, and that they’ll probably burn a little more cash this year than last because they’re upgrading their test equipment.
It may well work out fine in the end, but there won’t be an “Atomera inside” label on your next iPhone and their revenue won’t suddenly shoot into the stratosphere on September 8. This is still really an R&D project in the early stages of trying to commercialize their technology, and handicapping that progress would be difficult even if I were an expert on trends in chip fabrication (I’m not, in case that’s unclear). My guess is that ATOM shareholders will probably be happier if they buy on pessimistic days and just ignore it for a few years before they check back to see if meaningful progress has been made, I’ll sit this one out personally.
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Disclosure: Of the stocks mentioned above, I have positions in Apple and Intel through call options and/or stock ownership. I will not trade in any covered stock for at least three days, per Stock Gumshoe’s trading rules.