by Travis Johnson, Stock Gumshoe | May 9, 2016 1:01 am
[ed. note: This article was first published on December 3, 2015. The ad has been running again in similar form, and with similar hints about the “secret” company being teased, so we’re republishing this solution to help answer some reader questions. We have not re-analyzed the stock, and the article has not been updated or revised.]
–from 12/5/15—
This ad from Louis Basenese[1] for his VentureCap Strategist caught my eye, partly because it’s based on the same general trend as the pitch from Michael Robinson[2] for his “Neural Imprinting” idea (and secret stock) a couple weeks ago. Of course, that one turned out to be a reasonable investment, but not an earth-shaking stock that will explode because of virtual reality in the next few months — the promise is always bigger than the reality.
That same virtual reality pitch, however, comes also from Louis Basenese — and unlike Robinson, he’s not touting a large, profitable and established company (NVIDIA turned out to be the company touted by Robinson, in case you forgot… that article from a couple weeks back is here[3]) — he’s pitching a tiny company with a $47 million market cap that he implies is some sort of a “VC” opportunity.
The ad is long and drifts across a few topics, so I won’t bore you with the whole thing — but he catches your attention with the news that the NFL’s highest-rated quarterback is “all in” on this technology, and that it’s bound to boom in consumer acceptance as the biggest brand in the space (Oculus[4] Rift, owned by Facebook) comes to market with their $400 headset early next year.
But what really catches my eye, of course, is the absurd profit projection that Basenese implies:
“I expect this company’s meteoric rise up the S-curve ‐ toward a billion-dollar valuation ‐ could happen before the end of the year.
“The ‘float’ ‐ the number of shares available for public consumption ‐ is incredibly low, which means your investment won’t suffer from dilution.
“To date, the company has only issued 1/100th the amount of shares that Microsoft has issued.
“You’ll be invested directly alongside storied venture capital firms like Sprott Asset Management and Sonora Investment Capital.
“Although it’s ultimately your decision whether to invest, keep this in mind…
“We’re at the most critical juncture of this company’s development, as it’s about to receive a final funding push.
“So on the merits of the other 35 newly hatched billion-dollar companies I predicted over the last five months ‐ collectively worth over $50 billion ‐ I suggest securing my latest report, ASAP.
“Investment proceeds could runs as high as $342,857 per reader.”
Lots of squishy language in there, of course — “could run” as high as $342,000, “could happen before the end of the year,” but the whole spiel drives you to the conclusion that this stock must be on the verge of some massive breakout, whether it’s a big IPO[5] that soars dramatically higher or just a miraculous 1,000% return for, golly, any reason at all. And he’s got one of those arguments built on almost nothing that indicates these stocks “should” rise within 56 days.
So what’s the stock? Basenese’s basic argument, once you get down to it, is that Virtual Reality[6] needs gesture recognition. That’s already available in lots of forms, of course (VR headsets attach to computers and gaming systems, so Microsoft’s Kinect for the Xbox is a basic gesture recognition technology, and there are others), but it’s far from perfect. So apparently this company has something to do with making it better or “owning” the technology.
Here’s more from the ad:
“The innovation I’m about to brief my partners on is called ‘gesture recognition’ technology, and it’s part of Vega.
“You’ll recall that Vega is an acronym that stands for the ‘Virtual Ecosystem Gaining Adoption.’
“Put simply, the Oculus Rift headset ‐ or any other headset, for that matter ‐ can’t function properly without gesture-recognition technology, which assures its rapid ascent up the S-curve.
“So what’s gesture recognition technology, and why should you care?
“Well, it’s everything!
“It literally unlocks the entire virtual world.
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just click here...“In the simplest terms possible…
“Gesture recognition is a brand-new computer language technology that interprets human gestures via complex mathematical algorithms, and then feeds the gesture information to the virtual reality headset.
“Although a recognizable gesture can originate from any bodily motion, it’s typically derived from the face or hand.
“If the Oculus Rift headset is the gateway, then gesture-recognition technology is the gatekeeper ‐ one can’t exist without the other.
“‘Gesture recognition is critical to the mass market adoption of Virtual Reality,’ says one top industry insider.”
So how about our specific little company? What can we learn about them? A few clues:
“Virtual reality fortunes won’t be minted on the headsets!
The fortunes will come from Vega. That is, the software and drivers needed to unleash the virtual world! But here’s the best part…
“The company behind the technology is presently valued at only $47 million.”
So what is Lou talking about this time around? Well, we can answer the easy questions first — yes, virtual reality is being used by some NFL teams to help get more practice “reps” without the players being on the field and suffering through that wear and tear… and the quote about being “all in” is from Carson Palmer (who has been the top rated QB from time to time, though he’s currently #3 on the list.
And some people are working on gesture recognition for virtual reality, and consider it a critical part of moving VR to that next stage.
But when it comes to the actual stock, I have to admit that I’m only at about 98% certainly that I know what Basenese is touting: I’m pretty sure this is a pitch for Spectra7 Microsystems (SEV in Toronto, SPVNF OTC in the US).
It is indeed a $47 million company, though that’s in Canadian dollars — about US$31 million. And though they are small and fairly young, they do have “funding events” pretty much every quarter to keep the lights on — issuing equity, getting cash from warrant redemptions, or borrowing a wee bit.
They are a semiconductor firm, so their contribution to VR (they hope) is in making thinner, lighter interconnects and wires that allow for faster data transmission, which in turn, they say, will lead to the possibility of the gesture recognition being built into the headset, not in some separate sensor.
So far their sales are ramping up, though not, as far as I can tell from browsing the financials, to anywhere near the level that they might be profitable in the near future. I have read very little about them and don’t know what their market or competition is, and I’m rushing out the door to a meeting and don’t want to make you wait… so I’ll have to leave you to handle this one on your own — whaddya think? Any interest in little Spectra7? Have a better idea for the stock hinted at by Basenese? Let us know with a comment below.
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I don’t know this company but there are lots of players in this “gesture recognition” area. Some focus on facial clues, some biometrics, others typical hand and body movements. For example one company, LEAP, has raised a ton of money and is getting lots of attention.
I’d have to dig into this little company to see what they have it’s probably a very long shot.
I don’t know if its public but how about Emotiv their headset just ran a micro drone race. No hand controller.
looked like it was brain controlled but it was controlled by facial muscles.
Ah now I see what these guys are about – it’s not really gesture recognition but rather they make new, much thinner cables to attach things. So unless I am still missing something this is a hardware/cable company for tablets, displays, headsets, and devices. Thinner is better certainly – especially with things that you wear.
But wireless seems to be gaining share and will continue to do so. I realize that for high end applications like gaming and 4K you will probably want cables for some time due to latency and performance issues with wireless but that will go away over time.
For this to work I’d think the industry would have to standardize in some way on their interconnect technology. They seem to be getting design wins from individual suppliers which is at least a start. Gross margins actually look very good given their business – 68%.
Operating expenses are high but most of that is R&D. So far there hasn’t really been any recent YoY revenue growth so this is really speculation.
VUSIX local VR company,may be worth checking out
I almost bought some of their augmented reality glasses at one point — kind of like a souped up version of Google Glass. It can be tough to build a niche when you’re in the hypercompetitive gadget space, they’re actually public (ticker VUZI, another LD Micro conference company that’s probably public before it has good reason to be), they’ve been teased before: http://www.stockgumshoe.com/2015/06/friday-file-the-penny-stock-index-plus-criteo-crunch-and-a-small-buy/
Travis:
Is it possible the stock pitch is in fact for Vuzix, and the material in the pitch is only updated for a few data points? I am confused by the title of the pitch mentioning “VC preferred shares” and the comments about “incredibly low” … “float”. Spectra7 does not match either comment, unless the writer is taking a lot of liberties with the material. Combined with the knowledge that Basenese is already high on Vuzix through a different newsletter I subscribe to that he participates in, if not advises, then is it possible the pitch is for Vuzix?
Depending upon when the sales pitch was written (say for example very early 2015) then VUZI was not much larger than a $47M market cap company itself (its about double that level now). And they were just about to receive the major investment by Intel, which could be the reference to the “final funding push” which was completed I think in February. And with its recently released new products, that could have been the catalyst they were looking for to boost the stock onto at least the start of the S-curve before year-end. I know Vuzix owns a number of patents, but I don’t know if any of them could be considered “software and drivers”.
Of course its possible during the research on Vuzix and Nvidia they stumbled on Spectra7, but where I really need your help is if preferred shares are available on the open market. I assumed all of the shares are held by Intel, but maybe that is not true. And since the preferred shares are convertible into common stock based on company financials notes (earning 6% in the meantime), then there would still be an opportunity for upside just like common stock holders.
My crude financial search tools can’t find any symbol for the Vuzix preferred shares. I already hold a small investment in the common stock, but would much prefer to hold convertible preferred if they were available on the open market.
Stanford University’s Football team is using this NOW and the company name (I don’t think it is public(?) is STRIVR. Carson Palmer has used their VR device (goggles ?). It was invented, or enhanced, by Stanford related Profesor.. Please check this out by googling Stanford university/Virtual Reality lab/STRIVR. Hope this helps! Don C.
Yes — as with many such pitches, the hook is the understandable idea (like the virtual reality football practice technology), but the actual tease is for an unrelated company that may eventually have some role to play in improving the way virtual reality works. There are hundreds of startups and software/content ideas and designs in virtual reality, most of them will have no reason to ever go public because their funding needs aren’t dramatic or their growth markets huge.
Its Movidius, but its not public yet
Movidius is another of the many stocks working on systems and/or chip designs for visual processing, though their focus is on machine vision (which can tie in to motion sensing for immersive VR environments). Their valuation at their most recent funding was more like $300 million, but they remain venture funded.
In his presentation Basenese said “you” could buy 13,000 shares for $5k… isn’t that a “penney” stock for sure? What company could that be? Spectra7 is about $9/sh, isn’t it?
SEV.TO is around 40 cents a share.
FYI-any stock under $5 is considered a penny stock.
GLTA!
Just threw $ 600 at SPVNF .. foolishly
a.
Good luck to you, hope it works out. $600 is one quarter of the trading volume for the day so far.
https://www.ifixit.com/Teardown/Oculus+Rift+Development+Kit+2+Teardown/27613
Check out step 10 and you find one of Spectra7’s SEV’.TO chips in Oculus DK2 . The have also produced many other chips for gesture recognition which will probable be introduced into future oculus releases.
http://www.spectra7.com/
Travis. In Toronto, it upgraded to TSE some time ago and has average daily volume over 200,000 shares.
In VR it is essential to keep latency to a minimum because latency induces motion sickness which can be problematical with VR. Oculus Rift headsets are wired to minimise motion sickness. Thus the thin Spectra7 cables are expected to be required in vast numbers when Oculus Rift consumer version is launched in a matter of months because of their speed and resolution.
Seems like Spectra7, but the pump is funny. In Q3 reporting, they are ramping up inventory, which is good, but they will most likely require some type of financing to bridge their investment in growth (hiring like a mofo) and cashflow from Oculus sales.
The tech itself seems solid and having Bob Dobkin aboard (took a small part in the last financing back in March) might actually help this company be a solid business….but not a “$1B valuation before year end” (what’s he smoking? lol).
They are looking to move into the data centre market with their interconnects, which has great potential, but i don’t know how easy it will be to gain market share.
I own a bit as i like it as a speculative investment, but i’m not dreaming about owning the yacht in the Mediterranean.
NVIDIA GPUs Power Facebook’s New Deep Learning Machine
12/10/15, 12:00 PM
SANTA CLARA, CA — (Marketwired) — 12/10/15 — NVIDIA (NASDAQ: NVDA) today announced that Facebook will power its next-generation computing system with the NVIDIA® Tesla® Accelerated Computing Platform, enabling it to drive a broad range of machine learning applications.
While training complex deep neural networks to conduct machine learning can take days or weeks on even the fastest computers, the Tesla platform can slash this by 10-20x. As a result, developers can innovate more quickly and train networks that are more sophisticated, delivering improved capabilities to consumers.
Facebook is the first company to adopt NVIDIA Tesla M40 GPU accelerators, introduced last month, to train deep neural networks. They will play a key role in the new “Big Sur” computing platform, Facebook AI Research’s (FAIR) purpose-built system designed specifically for neural network training.
“Deep learning has started a new era in computing,” said Ian Buck, vice president of accelerated computing at NVIDIA. “Enabled by big data and powerful GPUs, deep learning algorithms can solve problems never possible before. Huge industries from web services and retail to healthcare and cars will be revolutionized. We are thrilled that NVIDIA GPUs have been adopted as the engine of deep learning. Our goal is to provide researchers and companies with the most productive platform to advance this exciting work.”
In addition to reducing neural network training time, GPUs offer a number of other advantages. Their architectural compatibility from generation to generation provides seamless speed-ups for future GPU upgrades. And the Tesla platform’s growing global adoption facilitates open collaboration with researchers around the world, fueling new waves of discovery and innovation in the machine learning field.
If anyone still interested in this subject …. Google “what’s in Facebooks Oculus Rift? Investment opportunity”
Also … check out Himax Tech. (HIMX)
FYI, lots of chatter about virtual reality this year from investing pundits… Our other two pieces on virtual reality of late were that “death of the iPhone” one about HiMax, and Robinson’s “neural imprinting” one about NVIDIA.
Is Louis Basenese a promoter of Spectra7 Microsystems.
My wife is 64 and just tried An Occules Rift? At work.(maybe Samsung) She loved it. Went to Italy and the Grand canyon, She said You look up you see the sky, Look down you see the ground, Did not make her sick (motion sick) She loved the thing, I think FB or Samsung might have a lock on this. FB doen’t pay a dividend, I however
I think they got the money and talent to do the best job of this one. I already know what she is getting for X-mas this year. We don’t do gaming, However as sad as it sounds , travel on the cheap, or going back to the past or back to the future, I think this will will go big. I did not try it myself. However This maybe like TV during the 50″s. Anybody could show you some crystal caves (right this stuff down and do it just for me) , Or the view from the top of pikes peak on a clear day. Sci-fi could show you bigfoot , You could take a trip to the L.A. zoo, or Antartica, or Africa. This will be the new TV entertainment like adventure, How to invest right I don’t know. I’m thinking maybe FB. I’m not the best investor ever born, however I’ve been doing kind of well,