Here’s the intro to the latest teaser pitch from Nomi Prins… it’s a doozy:

“Declassified Government Energy Experiment Set for Commercial Release on March 22 at 9 a.m. ET

“‘SMR’ fuel hid in government shadows for 68 years — but it’s about to unlock a new $4 Trillion energy market… and this tiny Oregon firm (which you can play for $2 per share) has the ONLY Federal license to produce it.”

The special report she ends up peddling is called “The Next Exxon,” and this is how the publisher describes it on the order form:

“When Nomi heard whispers of the country’s first ‘SMR’ firm to secure approval from the Nuclear Regulatory Commission — she immediately dialed up her contacts inside Congress for the full scoop.

“Her investigation uncovered an investment she believes could rival the 240-fold growth of ExxonMobil over the long haul. A company that could single-handedly transform the U.S. energy markets in the coming year. Right now it trades for 1-50th the price of Exxon, but if Nomi’s prediction plays out, early investors could make millions.”

This is all from an ad for Rogue Strategic Trader, which is the warrants-focused “upgrade” service from Nomi Prins (currently being sold at $1,500 for two years, no refunds — generally seems like a mimc of Casey Strategic Trader from the same publisher). The last teaser pitch we saw from that service was touting warrants on Lion Electric (LEV) back in October, which hasn’t worked out particularly well at this point, but let’s see what she’s pitching today.

We know up front that this is probably a warrant, not a stock or option play — so that narrows down the possibilities. And we know it’s about nuclear energy, which has become popular again recently because of the war in Ukraine. So what’s the story?

Here’s the “big picture” pitch? This story is read by Jon Alexander:

“The bombshell contained in the upcoming exposé has remained under government wraps for 68 years.

“For 68 years, the Federal government has been running a secret experiment.

“Unknown to all but the highest-ranking officials like myself.

“Quietly conducted on U.S. soil.

“Every day since 1954…

“In densely-populated cities in California, Texas, Florida, Washington, and Virginia…

“These tests were conducted inches under the feet of Americans — using a powerful energy technology called ‘SMR.’

“I know this because I personally worked on ‘SMR’ projects for years.

“Until recently, only government engineers were allowed to use it…

“But soon, that’s about to change.

“And quickly…

“Because a bleak winter… and an unprecedented domestic energy shortage…

“Is about to unleash ‘SMR’ into the commercial realm.

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“It could happen as soon as March 22nd.”

And as is almost always the case, the ad implies that all the “big name” folks are already investing in this idea, but you have an advantage because you can buy into a “tiny company” for a low price to stake your claim on the riches to come…

“It comes as no surprise America’s marquee Billionaires are lining up to invest.

“Bill Gates… Jeff Bezos… Peter Thiel… Warren Buffett – they’re all piling in.

“Starting today, for less than $2 per share, Nomi will show you a way to join them.”

And, of course, it’s URGENT URGENT URGENT… they say that’s because there’s a bill in Congress that will release this “secret” SMR technology into commercial use…

“In the weeks ahead, a new bill titled S.3428 could thrust ‘SMR’ into the commercial realm…

“And onto the front page of every major news outlet in the country.

“By the time that happens, it will be too late for most investors to profit.”

But we’ve been around the block with these kinds of teaser pitches for 15 years here at Stock Gumshoe, so we start out with extreme skepticism about that urgency… usually, anything about a deadline or a “in the next few weeks” pitch that tries to fire up your fear of missing out is really just about pushing you to make a decision. The deadline is often just made up, a reason for you to pull out your credit card NOW instead of taking a moment to think it over (yes, people will research a new dishwasher for six months before pulling the trigger, but if the right greed impulses are fired up by some effective copywriting, some of those same people will pony up a non-refundable $5,000 to buy a subscription that they really know nothing about).

So what is this little warrant play she’s teasing?

Well, the “SMR” part might sound familiar — that’s a common abbreviation for Small Modular Reactor. There are lots of different nuclear reactor designs around the world, and several companies working to help commercialize new smaller fission reactors, so presumably she’s pitching one of those firms.

Which one? Here are some hints she drops… or as we call them, “clues”:

“… they’re already a Federal government favorite.

“They’ve received $1.4 Billion in grants from the Department of Energy….

“Popular Mechanics called it ‘A huge win for the startup leading the nuclear revolution.’

“They have gained the backing of investors like Samsung…

“America’s largest steel producer, Nucor steel…

“The Fortune 500 Texan engineering firm, Fluor Corporation…

“They’ve signed binding contracts with 7 U.S. states — including Utah, Wyoming, Idaho, New Mexico… and even ultra-green California.

“Along with signed international agreements in Canada, Poland, Czech Republic, Romania, Korea, and Japan.”

She makes the point that everyone is a little bit afraid of the huge nuclear power plants that still supply a good chunk of US electricity (about 20%), and nobody wants that iconic cooling tower in their backyard (she calls them “smokestacks” for some reason, though of course nuclear power plants emit no smoke)… but that these smaller reactors are far safer and “meltdown proof” and don’t represent the same potential danger to the surrounding area….

“In an unprecedented feat of engineering — which included a 2-million page design submission…

“The Next Exxon created the world’s first ever ‘self-contained’ nuclear power reactor”….

“Since 2004, some of the world’s best nuclear engineers – employed by this company – have gone to great lengths to eliminate the possibility of a reactor meltdown.

“They saw what happened at Fukushima, Three Mile Island and Chernobyl — and designed a new reactor that removed the biggest point of failure in OLD ‘Gen 3’ reactors.”

The spiel goes on and on, but we’ll cut it off there and see what the Thinkolator can make of those clues… just have to pull the old dear out of the garage and get that tarp off, yank the chain a few times, shovel in our marketing pitch and a few of those little uranium “pebbles”… and voila! We learn that this is NuScale Power (with the convenient stock ticker SMR).

Here’s how they describe themselves:

“NuScale Power Corporation (NYSE: SMR) is the industry-leading provider of proprietary and innovative advanced small modular reactor nuclear technology, with a mission to help power the global energy transition by delivering safe, scalable, and reliable carbon-free energy. The company’s groundbreaking VOYGR™ SMR plants are powered by the NuScale Power Module™, a small, safe, pressurized water reactor that can each generate 77 megawatts of electricity (MWe) or 250 megawatts thermal (gross), and can be scaled to meet customer needs through an array of flexible configurations up to 924 MWe (12 modules) of output.

“As the first and only SMR to have its design certified by the U.S. Nuclear Regulatory Commission, NuScale is well-positioned to serve diverse customers across the world by supplying nuclear energy for electrical generation, district heating, desalination, commercial-scale hydrogen production, and other process heat applications.”

It’s still nuclear power, so it is still very likely to move slowly (the first demonstration plant they’re planning to build, with six modules based at the Idaho National Laboratory and managed by the Utah Associated Municipal Power Systems (UAMPS), is expected to be under construction by next year and fully operational in 2030), but NuScale has been working with the US government on this project for more than a decade, and does have the only modern SMR design that’s currently approved for US power plants (that approval just got published as the final rule last month, effective February 21). Presumably that gives them a bit of a lead over other reactor designs in the coming decade, at least in the US (there are four other “pre-application” candidates for small modular reactor designs, and there were some legacy small reactor designs before that which never really moved forward, none seem to be anywhere near as likely to enter production as NuScale right now), but, again, it might move a lot more slowly than you’d assume if you’re just learning about this story from a hyped-up marketing pitch.

The company was one of the last ones to go public through a SPAC merger before SPACs completely imploded, their merger was effective just about a year ago… and that means, yes, that it also has warrants trading (warrants have been fairly rare in recent decades, but essentially every SPAC deal includes warrants so they really exploded on the scene again during the SPAC mania and got us all daydreaming of riches).

So that’s what Nomi Prins is pitching here: The 2027 warrants on NuScale Power (SMR/WS, SMR.ws, SMR.WT or something similar, different brokers use different tickers for warrants). And yes, as happened with Lion Electric back in October, her attention has helped to drive some trading volume and a higher share price for those warrants today. As of now, the shares trade at $9.50 and the warrants, which give you the right to buy the shares at $11.50 anytime in the next four years or so, are trading at about $1.80.

NuScale is in better shape than a lot of other recent SPAC deals, it’s in a trendy space as many people are talking up a renaissance for nuclear power, so the SPAC redemptions were fairly limited (less than 50% of the SPAC shareholders redeemed for cash before the merger went through last year). They also have some strong backers and partners, not just the US government and a bunch of smaller partners (Samsung, Nucor), but also the global engineering giant Fluor (FLR), which was and continues to be the majority shareholder of NuScale. And they have a fairly capital-light business model, they’re not going to own these reactors or build them on spec, and Fluor would do a lot of the heavy lifting, so they do think that their ~$320 million in cash will be enough to get them to the point where their early deals are generating positive cash flow, maybe by 2024 or 2025. We should probably assume that plan is overly optimistic, since pretty much every SPAC deal that was made over the past few years was built on cockeyed optimism, but they do have a lot of potential contracts and deals in their pipeline.

You can get a pretty good idea of the company from their SPAC merger presentation that was published a little over a year ago. They have the one lead program in place, with a contract to build their first real modular reactor (that’s the one which is expected to enter service in 2030), so it’s a very long time-horizon company… but it’s not entirely dependent on the delivery date of their modular reactors, the way they describe their commercial deals they expect them to generate revenue for about eight years before the reactor is commissioned (licensing, training, testing, fueling, project management) and to continue with fees for services, parts, refueling and training throughout the life of the reactor (60+ years, they say). They have a lot of MOU engagements (memorandums of understanding), including a number of potential overseas deals that could perhaps move even a hair faster than their initial UAMPS project, including one in Romania, but it looks like that first UAMPS project in Idaho is their only firm contract right now.

The company will give an update this week, they are expected to report their fourth quarter results and host a conference call on Wednesday, so the story and the timeline could change a bit, but that’s the basic situation right now.

If you’re new to warrants, they are a little bit like call options — almost every SPAC deal includes warrants as a sweetener for the folks who put up the initial cash for the SPAC, and in almost every case they’re five-year warrants with a strike price of $11.50. That’s also the case here, these are $11.50 warrants and the expiration date is five years after the merger was consummated, which is May 2, 2027. The simple math is that these warrants at $1.80 are a bet that SMR shares will be over $13.30 at some point in the next four years ($1.80 plus $11.50). Today, SMR shares are at $9.50… which means the stock has to go up at least 40% over the next four years for the warrants to break even, and at least 50% for the warrants to offer a better return than the common shares. After that, the leverage of warrants really kicks in and your returns go up much more quickly.

There are also early redemption clauses that limit the upside pretty meaningfully, however, so that’s worth being aware of: if the shares are over $10 for 20 out of 30 days they can do a cashless redemption, effectively forcing shareholders to redeem their warrants in exchange for a partial share, (probably something between 1/3 and 1/2 share, depending on the share price at the time); and if the shares are over $18 for a similar period of time, they can redeem them early and effectively force you to put up $11.50 and exercise your warrant or lose it. (In either of those cases, if you ignore the notice they can redeem your warrants for pennies… so pay attention.)

Just about anything can happen in a short period of time, especially if investors get manic about a stock and bid the warrants way up without worrying about the early redemption clauses — and it’s also entirely possible that the company could choose NOT to redeem the warrants when they have the right to do so, but in order to be cautious I think of these kinds of early redemption clauses as probably maxing out the potential value of the warrants at about $8 (assuming the stock bumps up into the $18-20 range at some point, the company redeems the warrants and forces you to exercise or lose the warrant, and you use your warrant plus $11.50 to buy a share or just sell your warrant to someone who wants to exercise it).

The maximum loss, of course, is 100% — if the stock stays below $11.50 for the next four years, either because the progress slows down or there’s a problem with their SMR projects or just because they end up needing a lot more money and dilute away shareholder value with new stock offerings, the warrants could gradually lose value as time passes and expire worthless in 2027.

So the way I think of it, that’s a likely max gain of about 300% for the warrants, and a max loss of 100%.

For the stock itself, it’s likely that the max loss is much lower than 100% (it could go bankrupt, of course, but absent that it’s more likely the shares would wither and decline over time if things go poorly, not drop quickly to zero), and the max gain is essentially infinite over a longer period of time, since nobody has a right to call your shares away unless the company is acquired (and you’d get a vote on that, though not a very powerful one, since Fluor is still the majority shareholder).

What are the possible scenarios? If you envision the stock going to $20 in the next few years, the warrants would probably provide the best return, roughly 300% versus a 100% gain for the stock. If you think the stock could bounce around from $8-12 over the next few years and has a much better future five or ten years from now, the stock is perhaps more attractive because it will neither expire worthless nor be capped if the stock returns are far stronger, and you don’t have to watch as closely for sharp moves in the share price. If you think the shares might drop to $5 in the next couple years, in that scenario the stock would lose roughly 50% of its value and the warrants would likely lose about 90% of their value, so the risk is certainly lower for the stock.

On the other hand, if you think people are going to get super-lusty about this stock at some point and drive it to $50 in a very short period of time (say, a month or so), the warrants would give you some very exciting leverage. It takes roughly a month to get to the “early redemption” trigger even if the company reacts to that immediately, and it might not do so, which would mean that if the shares skyrocket from roughly $10 to $50 in short order, then your ~$2 warrants could provide 2,000% returns while the ~$10 stock provides a 400% return… that’s what led to some of the wild returns during the SPAC mania in 2020 and 2021. That kind of mania seems unlikely to return at this point, but, well, sober observers would have guessed that it was unlikely the first time around, too, manias are tough to predict.

Do remember, if you speculate on the warrants, that you have to pay attention — if there’s an early redemption call or event, which can happen anytime, you should get a notice from the company through your broker, but they won’t save you from yourself… if the stock is at $20 in a year, for example, and you ignore or miss the early redemption notice, the company might redeem your warrants for a penny even if they’re theoretically worth $9 at the time. Likewise, if we reach the expiration date for warrants, your broker probably won’t automatically exercise them for you like they typically will with call options, and, depending on the broker, may not even try that hard to contact you — if you don’t act, warrants can expire worthless even if they’re in the money.

Looking for a less-risky alternative than NuScale? You could just buy Fluor (FLR), which is a profitable engineering and construction company and would likely benefit from a huge surge of activity for NuScale, even though their controlling stake in SMR shares make up only about 10% of the enterprise value of FLR. FLR trades at about 20X forward earnings and should be well-positioned if we continue to see infrastructure investment pick up around the world, though it’s also likely to continue to be pretty volatile as those waves of global infrastructure investment crest and fall, and most of their projects have nothing to do with nuclear power.

Or if you want to buy what is effectively the manager of the world’s biggest fleet of small nuclear reactors, you could consider BWX Technologies (BWXT), which is working on new microreactor and commercial nuclear technology as well, including some nuclear clean-up, but is primarily known for selling and managing the reactors used by the U.S. Navy (mostly submarines). They’re also established and profitable, and trading at about 20X earnings.

Or, of course, you could buy into the UK nuclear hopes of Rolls-Royce, which continues to be teased by Karim Rahemtulla — they’re hoping to build some similar small modular reactors, too, though they await the government go-ahead on orders (and the company itself, of course, relies much more on passenger air traffic returning to 2019 levels than on nuclear projects, aircraft engines are still by far their most important business).

There’s also at least one surviving ETF in the US that has some exposure to nuclear power, beyond just owning uranium miners — that’s the Van Eck Uranium + Nuclear Energy ETF (NLR), so that’s a more cautions buy if you want some exposure to uranium and the nuclear plower plant operators, though there aren’t a huge number of real ‘supplier’ companies in the US stock markets after the gradual decline in nuclear power plants over the past decade. That ETF includes the dominant uranium suppliers as well as a few utility companies and some supply chain companies, like uranium enricher Centrus Energy (LEU) and BWXT. Sprott Uranium Miners ETF (URNM) offers a more direct play on the commodity itself, mostly through global leaders Cameco (CCJ) and Kazatomprom (KAP.L).

Or, I suppose, you could go with some of the penny stock hopefuls like Lightbridge (LTBR), which has been teased many times over the years for its safer fuel design. That dream keeps getting pushed off, but they’re hoping to be able to fabricate and test their next-gen fuel rods over the next couple years.

It’s your money, though, so… whaddya think? Ready to bet on nuclear power’s renaissance? Think NuScale has promise in the small modular reactor business, or maybe have a different favorite in the space? Excited about warrants, or more patiently interested in the stock’s long-term promise? Rather just buy uranium miners and hope for a real hype cycle to heat up again? Let us know with a comment below.

P.S. If you’ve tried out a subscription to Nomi’s Rogue Strategic Trader over the past couple years, please click here to visit our reviews page and let your fellow investors know what you think — worth it? Not so much? Curious readers want to know. Thanks!

Disclosure: I do not own any of the companies mentioned above, and will not trade in any covered stock for at least three days after publication, per Stock Gumshoe’s trading rules.