Brian Tycango, who joined Stansberry a few years ago after recommending mostly Asian stocks for a long time in his own newsletter, is launching a service called Visionary Investor with teaser ads that are getting the attention of Gumshoe readers in recent days. At $49/yr, this is positioned as another “entry level” growth-focused newsletter, in the same vein as Jeff Brown’s Near Future Report or Stansberry Innovations Report (which is also bundled with this deal, if you pay $79), or any of a dozen similar services offered by other newsletter publishers. (And that’s the “sale price,” of course, Visionary Investor renews at $199, as is also fairly typical).
And the promise, essentially, is that he’s found the next great energy storage investment… the ad starts out with some of the scary stories of past power outages, including the massive blackouts in Texas recently, and in the Northeast during the huge blackout in 2003 or the Superstorm Sandy outages in 2012, and positions this “new energy” as a savior. This is from the order form:
“And one company has found the ultimate way to harness the cheapest energy in the world. I believe their tech will be used to stabilize and sustain power grids all over the world.”
So what’s the storage tech he’s pitching today? What stock are we looking at? Here’s a little sample from the ad:
“This little black box has the capability to store 2x as much energy as the ‘groundbreaking’ storage tech Elon Musk debuted in 2020.
“It can cycle through over five times as many charges. That’s decades of life – making it one of the longest-lasting energy storage devices on the planet…
“Right now, this is one of the cheapest ways to capture and harness power in the world.
“This charges up to three times faster than normal energy storage devices – including Tesla’s.
“And the energy stored within this black box is almost twice as dense as anything ever produced.”
The ad includes a photo of the “tiny box” that represents what he says is “one of the most advanced energy storage systems on the planet,” which makes it seem more real, and he name drops some big companies that might make you daydream of riches…
“It’s not Tesla… Amazon… Google… Apple… or any big corporation you’ve likely ever heard of.
“It’s actually up to 80x smaller than any of those.
“But in a few years, it will probably be a household name.
“And I predict that buying shares of this ordinary (but totally unknown) stock today could easily show you 600% gains.
“This key to virtually unlimited, free energy will be – by far – the biggest technological breakthrough of the 2020s.”
OK, so that means this “secret” company probably come in near $10 billion in market cap, since Tesla, the smallest of that bunch, is an $800 billion company at the moment.
What else?
“It took 10 years and over 2 million prototypes to find the perfect materials and configuration.
“It works flawlessly in -20° Fahrenheit temperatures.
“And the biggest benefit?
“It doesn’t explode when you puncture it, making it eons safer than the most widely used energy storage in the world today: the lithium-ion battery.”
OK, so it’s probably some kind of battery technology — and if it’s safer and they make the point that it doesn’t explode when punctured, it’s probably a solid state battery. Other hints?
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“The biggest names in investing have already taken early stakes… including Jeff Bezos, Bill Gates, Richard Branson, Michael Bloomberg, and Alibaba founder Jack Ma.”
We’re also told that they’re close to a prototype…
“The American company I’m talking about today is planning to reveal its large-scale prototype as early as January 1st, 2022.”
And a few other hints…
“And it’s all thanks to one small American company… that trades for far less than $25 a share today.
“In fact, this company doesn’t even rank among the top 1,500 listed companies in the U.S. – yet. But that won’t last long. I believe this company has a breakthrough that will rocket them toward the top of this list.”
I’m not sure what he means by “rank among the top 1,500 listed companies in the U.S.,” since that’s an inherently vague reference, but if you’re going by the Wilshire 5000 index of US-traded stocks, the 1,500th stock in that list has a market cap of only about $2 billion. If this stock is really near $10 billion, it’s roughly the right size to slot in at the bottom of the S&P 500 (that’s not the only criteria to be in that index, of course, but the smallest dozen or so S&P 500 stocks, like Under Armour (UA) and The Gap (GPS), come in with market caps of about $9 billion these days).
Other hints:
“This is a hardcore design that’s been tested in over 2 million prototypes.
“The large-scale prototype could be coming as soon as January 1st.”
And some validation from experts:
“Dr. Stan Whittingham – the winner of the Nobel Prize in chemistry for his development of the lithium-ion battery – was handed that research first-hand. After he reviewed it, he said:
‘I’ve not seen data this good anywhere else. I think this is a real breakthrough.’
“Another scientist… Dr. Paul Albertus… reviewed the data, too. He holds a PhD in Chemical and Biomolecular Engineering from Berkley. He said:
‘I’ve been in [this] area for over 10 years, and I have a habit of looking very closely at the details… [This company is] hitting the home run, in terms of performance data.’
“JB Straubel, the CTO of Tesla, even called this tech ‘a major breakthrough.'”
More clues…
“… there’s a victory to be had in this space… and it belongs to a company 1/80th the size of Tesla… which developed likely the best energy storage in the world to date….
“It can go over one thousand charges without seeing a 50% drop in performance….
“Their technology is safe.
“You can cut it open… stab it… even run it over with a truck… and nothing happens….
“It’s also more efficient.
“On average, it takes a Tesla (along with most lithium-ion batteries) 40 minutes at a supercharger station to reach an 80% charge.
“This new-age energy storage device takes just 15 minutes to hit 80%….
“… they could be cheaper to manufacture.
“I won’t get into the details, but this company has found a way to eliminate an entire step in the manufacturing process.”
And there’s the talk of patents, which usually impress investors…
“… they protected their innovative designs with over 200 patents.
“And we know those 200-plus patents… hold up in court.
“Because they sued a massive battery manufacturer earlier this year… and won.”
And Tycango’s specific prediction, for posterity:
“Right now is the moment… the inflection point for this small company.
“It has massive growth potential ahead. I believe they have the potential to generate enough revenue to grow their company’s market cap by six times… in just a handful of years.”
A few more hints?
“… this company isn’t running out of runway any time soon. They have funding from a monster $170 billion world-dominating car brand…
“And, they also have the backing of a technology genius and philanthropist…
“This combination allows for rapid, incredible growth in a very short period of time, especially with the announcements that could be coming next year.
“It’s no surprise that legendary investor George Soros recognized the power behind this world-changing company.
“He’s purchased over 1.6 million shares to date. Now that speaks for itself….
“Even their executives predict that they’ll have an annual revenue up to six times the size of their current market cap.”
And, of course, the “you couldn’t possibly understand without me” line…
“I can almost guarantee you’ve never heard of this company… that’s 1/80th the size of Tesla.
“But their technology has the power to transform far more than the power grid.”
So who is it? This is the semi-mysterious lithium metal battery innovator QuantumScape (QS), which was one of the most popular EV-related stocks for a little while last winter, but has come back to earth in recent months. QuantumScape went public through a merger with a SPAC about a year ago, immediately surged to $20 per share from the $10 SPAC price and then, as enthusiasm picked up, got to a ludicrous $130 or so back in December (with the market cap topping out near $50 billion)… and, despite continuing claims that they have the lead in the solid state battery market, and despite the continuing partnership with Volkswagen, the shares are now almost back to where they were when the SPAC merger was completed, in the low $20s.
It’s not a particularly small company, Quantumscape has a market cap of almost $10 billion still (which, yes, matches that “1/80th the size of Tesla” clue), and it remains very much a bet on the future for their still-pretty-secret battery design and materials. They are very unlikely to have any revenue at all for at least the next two or three years, maybe more, so any investment here is a bet, partially inspired by Volkswagen’s endorsement, that they will be able to finalize their battery design and scale up production by 2025 or 2026. When they talk about meaningful revenue and try to justify their valuation based on the run rate they expect when they reach full commercialization, they’re talking about 2027 and 2028.
Most of those clues in Tycango’s teaser came from the December 2020 announcement that QuantumScape made about its progress, including the quotes from Paul Albertus, Stan Whittingham and J.B. Straubel, all of whom were brought in by QuantumScape to serve on an expert panel reviewing the technology and answering questions at the press event (Straubel is on QuantumScape’s board, the others are scholars in the field). The Albertus quote about a “home run” gives some of the context — he said it looked like QuantumScape had hit a home run by developing their first single-layer “pouch” battery with this technology… but that it’s still just the first step. Here’s a little excerpt from a Barron’s article that ran at the time:
“Quantum is ‘hitting a home run,’ said Paul Albertus of the University of Maryland. ‘They ultimately need to achieve something like a grand slam to bring this technology to market.’
“All the data presented were based on Quantum’s single-layer pouch cells. They look like playing cards. The next step is to build and test a deck of cards. The deck will be the basic unit of battery power in an EV and many decks will provide a vehicle with its designed power and range. Going from the playing cards to the stacks of card decks would be the ‘grand slam.'”
The company does have that December 2020 “Battery Showcase” event up on its website, along with some other more detailed presentations and videos, so that’s a useful place to start if you’re trying to understand the technology and QuantumScape’s progress. The images that Tycango uses of the current battery packs being tested, those green square “pouch” batteries, are included in much of QuantumScape’s recent materials, including their second quarter letter to investors in late July and their August Investor Presentation. They’ve been gradually moving toward a prototype-ready design, starting with a single pouch cell and then a four-layer and, most recently, a 10-layer cell, and that green “tiny box” is the 10-layer cell they announced this summer. So there is progress being made, which is important.
And yes, the goal is to have “customer prototype sampling” in 2022 — Tycango’s tease that they’re “planning to reveal its large-scale prototype as early as January 1st, 2022” is just marketing optimism for “sometime in 2022,” it appears. The ambitious plan is still that they will be producing sample battery packs for use in test cars in 2023, and beginning “commercialization” in mid-2024, though they still have technological advances to make before they can get to that point, both in increasing the number of layers in the battery pack and improving the key part of their design, the flexible and porous ceramic separator between the lithium metal and the cathode material, and in figuring out how to manufacture the batteries in high volume in their pre-pilot manufacturing facility.
That pre-pilot facility, with one production line for testing, is in the early stages of being built and should provide for much more testing as the cells grow in size (they’re hoping for several dozen layers by next year, though the pre-pilot plant won’t be ready to start production until sometime in 2023), and will hopefully lead to the development of the pilot plant that they’re planning, with Volkswagen’s help, to use to prove that commercial production will work, and then scale up in future years.
Here’s what I said when I last looked at QuantumScape, for a different teaser pitch back in May:
“I love the story of QuantumScape’s ten-year drive to develop new battery chemistry in secret, and hope it works, but I’m not really excited about betting on a company where we probably won’t really have any idea of the ongoing economics for at least five years. I’ll keep watching from the sidelines, but yes, if all works well there is obviously a massive potential market, and certainly there’s a strong interest in new battery tech among both consumers and investors. Probably the biggest factor in their favor is that they have $1.5 billion in cash and a patient major partner in Volkswagen, but investors may have to be patient, too.”
And that’s still more or less how I feel now, though you can certainly feel little tendrils of “maybe it’s low enough?” creeping into your thinking when you watch a formerly hot speculative stock hit new lows, and the shares are down 30% or so from when I last looked at them.
The challenge for investors is that they really are still keeping a lot of secrets, it’s quite likely that QuantumScape’s “trade secrets” about materials are more valuable to the company than their filed patents, and the technology is not yet ready for large scale demonstration or even pilot production, let alone commercialization… which means that investors, to some degree, have to base their investment on faith. (Incidentally, that lawsuit Tycango references is about trade secrets, I expect, not really about patents — QuantumScape sued Fisker after Fisker hired away one of their scientists and that scientist apparently brought with her a bunch of proprietary material. The lawsuit wasn’t disclosed until this year, apparently, but it actually settled last year. Perhaps Tycango is referring to something else there, but I’m not aware of any patent lawsuits involving QuantumScape.)
What else? QuantumScape has opened up a bit this year, demonstrating their technology to some degree and releasing more detailed updates about their progress (as with the 10-layer battery cell). The biggest news last month was that a second partner has joined the party — QuauntumScape reported in an SEC filing that they signed an agreement with a second top-ten automotive manufacturer (the first is Volkswagen, their longtime partner), and that this partner will collaborate with them to evaluate prototypes and purchase some of the capacity of that pre-pilot production plant for inclusion in “pre-series” vehicles. (Pre-series is the step between the concept car or prototype and something that could actually be produced — a carmaker may develop many different pre-series variations, collaborating with suppliers and planning production needs and making changes to improve the cost structure, among other things, before settling on a base design to go into development).
So that’s a good sign, it’s nice to have another meaningful partner, but there’s still a lot of faith and patience needed if you’re an investor. QuantumsScape is still at least a couple years from building a pilot plant with a meaningful level of production, and at least three or four years from building a large scale factory with Volkswagen, and nobody really knows for sure whether this battery will really work as well as hoped under real-world conditions, particularly because they haven’t even prototyped a large enough battery yet to even begin testing.
So the first QuantumScape-powered Volkswagens, if they are ever to hit the road, have probably not been designed yet, and the goal is for the first few of them to be on the road in maybe five years. There will, of course, be updates and bits of good news and bad news along the way — I would assume that there will also be delays, as there always seem to be with new factories and new projects.
It’s a function of the massive size of the opportunity that they’ve raised such vast amounts of money,(they’re now sitting on about $1.5 billion), but from my very inexpert perspective there’s still a really meaningful risk of failure. It’s also really hard to invest in something that will not generate any revenue for at least several years.
The original SPAC presentation, published about a year ago, laid out their plan to be producing enough batteries for roughly 500,000 cars a year by 2027, at which point they would hit $3.2 billion in revenue and have fantastic 31% gross margins and be close to profitability. That looks lovely on paper, but since that relies on not just the QS-0 pre-pilot plant, which has yet to be built (that’s what they’ve ordered equipment for, and started work on), but also on the QS-1 pilot after that, with site selection planned for late this year, and the 20X expansion of QS-1 to go from 1 GWh to 20 GWh in capacity, which they hope can be built in a few years and begin production as soon as 2026, all of which is 50/50 partnered with Volkswagen, but also on the opening of a fully QuantumScape-owned QS-2 facility which will be more than twice the size of QS-1 and developed almost in parallel.
Even if you are willing to bet on QuantumScape having the design and the strategy that will work, with good partners and breakthrough technology, that’s still a really, really ambitious development timeframe. The share price probably reflects that those investors who got excited last winter have been listening more closely and saying “wait, how many years?”
And there’s going to be a lot of fighting between investors about what’s happening as we wait — most recently, there was a well-publicized short attack on QuantumsCape in mid-April, one of the longest “short” presentations I’ve ever seen (including, in a dig that probably gave heart palpitations to a lot of VC folks, a comparison to Theranos), and a quick response from the company, including an appearance by CEO Jagdeep Singh on CBNC. The most interesting piece I’ve read about QuantumScape since the SPAC deal, though, was a Bloomberg piece for which the author was granted a rare visit to their secretive labs, so if you want to avoid the long/short back and forth that’s probably the best place to start (and the article came out at almost exactly the same time as the short attack, coincidentally enough).
If they really have the best solid state (or semi-solid-state) battery design, and can achieve commercial production in five or six years, and nobody else has something markedly better in the pipeline by then, and QuantumScape’s chemistry ends up becoming the new standard in electric vehicle batteries, getting licensed to other battery makers around the world as they build out dozens of factories in the 2030s… then sure, it could easily be worth hundreds of billions of dollars in the end, more than justifying the current $10 billion valuation for QS and perhaps making the difference between a $5 billion valuation and $25 billion look pretty meaningless in 2025 or 2030.
And yes, there’s no reason why these batteries, if they do end up getting proved up with their automotive partners, couldn’t also someday become meaningful parts of the battery storage solution we’re looking for to help strengthen the electrical grid and support the move to a much more renewables-heavy electrical system. That’s not going to be the first step, though, and the real draw is automotive — large utility-scale batteries have a lot more flexibility than EV batteries when it comes to weight and safety, so there are lots of other appealing options for that market which are much closer to large-scale production, or even available today, and QuantumScale is very much focused on EVs right now.
I still can’t get my head around speculating on a massive industrial project that won’t bear fruit for five or ten years, but maybe that’s because it’s not helmed by an exciting attention-getter like Elon Musk. It’s certainly a cool story, I’ve found QuantumScape fascinating for years and I wish CEO Jagdeep Singh and his team great success, but I’ll continue to watch the stock from the sidelines for now, as they try to get their first test production line built and announce their first prototype over the next year or so. Maybe I’m missing the next big thing by waiting for more real-world progress, maybe not — you’ve got your own money to work with, so you get to make the call… and feel free to let us know what that call is, just chime in with a comment below. Thanks for reading!
Disclosure: of the companies mentioned above, I own shares of Amazon and Google parent Alphabet. I will not trade in any covered stock for at least three days after publication, per Stock Gumshoe’s trading rules.
Wish I had waited. Do you think a license deal may prove more profitable than actually building the units?
Thanks for the work you and your team does, great content.
Jc
Do you mean licensing out the battery technology and design instead of building the factories themselves (after that first 50/50 one with Volkswagen, at least)? Sure, licensing is always more profitable than manufacturing something yourself, at least in the short term… but unless they bring on a huge partner with a much bigger footprint to do the licensing and co-develop the manufacturing process from here at faster speed, like CATL or Panasonic, any kind of licensing deal is probably at least many years away. Given that their technology isn’t really ready for mass production and relies on trade secrets, I’m guessing they won’t bring on a manufacturing partner anytime soon… but I don’t really know, that’s just speculation on my part.
I am probably over invested in this area but liked what I saw with Decarbonization Plus Acquisition Corporation III (DCRC) and picked up a few shares of the SPAC. It’s around $10.00, they have strong supporters but I will most likely have to hold for a while to see results. I am the king at buying at the wrong time.
Jc
FYI for everyone else, that’s the SPAC merging with Solid Power, which has been another of the high-profile solid state battery name in recent years. Solid Power talks more about licensing out their technology and materials to other producers than QuantumScape does, which would make me slightly more interested, though my impression is that both are on similar timelines for testing, validation and real commercial production. Revenue-wise, going by their SPAC merger presentations, both Solid Power and QuantumScape are pitched as 2027-2028 stories.
Whenever you hear companies throwing around valuations like “1.8X 2028 revenue,” think back to how much of 2021 you were able to predict in 2015. So far, I’m at about “zero” on that measure of soothsaying skill. In 2015, I didn’t foresee either Trump’s election or the Biden backlash four years later, trade wars, tax cuts, accelerated cord-cutting, a pandemic and the stocks that the pandemic drove, semiconductor shortages, or lots of other things happening. I also didn’t think we’d have hundreds of stocks trading at 20-50X revenues. Guessing what the future will be like is really hard.
Future guessing is near impossible I totally agree. I just think Somebody is going to figure solid state out but with so many company’s throwing billions at it, I can’t drop real money into one of them…. well ok nvm, I’m over $10,000 now in QS, that’s def real money for me, and I’ll drop some in REDWOOD when it comes out, and I’ll look at solid power too. Good odds to hit at least ONE of them right. Kind of like my buying a 100 shares of both lucid and faraday future, something hopefully goes right (not expecting anything like Tesla results).
Too long to wait for results, and the Soros name is a big negative (for me). However I hope QS succeeds, because what they are making is very much needed.
FYI, If you want to avoid companies where Soros has invested, that list (according to hedgefollow) includes a lot of familiar names, including Amazon, Google and D R Horton with very large allocations. QuantumScape is a fairly small position, it appears, less than 1% of Soros Fund Management’s disclosed portfolio of US stocks.
HELLO
OLED what is happening please let me know
sorry out of the topic .
Thanks
Looks like you are on to something with OLED, not on my radar, just took a look. Guessing they are down from the peaks due to supply issues? Covid? Chip Shortage? When the world rights itself this one should head north. Thanks for the tip. I pick up Sprout Social Inc – SPT from following Gumshoe. Wish I had bought more. Up 80% Gumshoe is a great value. Solid Content without the noise.
I added to OLED last week and shared my thoughts here: https://www.stockgumshoe.com/2021/10/friday-file-part-1-fire-tech-and-too-big-to-grow/
First, I think “80 times less” means zero or less. But anyway, we already have the most efficient solar energy storage. Fossil fuels. The technology is already here. Want to get even more energy efficient? Go nuclear. We used to work on breeder reactors. They created more fuel than they used. Decarbonization is a recent stupid fad based on bad and/or fake data.
Either you’re joking or you are way out of touch with reality. Hope it’s the former.
You are so right, and the comment by gillo is unfathomable to me.
Beautiful, Carl.
Coal, oil, gas and nuclear.
Recently drove through northwest Texas and was reminded of the unrecoverable financial subsidy expense with wind and solar.
I’ve done ok once or twice buying or selling (pre SPAC kensington at around $15, sold in the 40’s. Back in for the long haul now around $23.91 (I checked). I need to learn about putting a couple thousand into something that can truly multiply the stock going up. Strictly gambling I understand, but occasionally I make money at the craps table too. Guessing options, but I really don’t know any terms but buying, selling and shorting (which I have never done).
QS technology sounds good if you need high density storage like for EV’s but it will probably take a long time before they generate much revenue. In the meantime there is another technology that is ideally suited for stationary storage of solar and wind energy: Vanadium Flow batteries. There are only a few players in this space so far and at least one is still privately held. These batteries are up to 4 x cheaper than lithium ion , will last 25 years without developing a memory and are non-toxic. These are perfect for home, industrial or grid use. It is hard to invest in this right now. One player is Invinity Systems which is listed on the LSE (ÍES). There will be others and most will probably be acquisition targets.
I bought a few Largo (LGO) earlier this year- they have both a Vanadium mine and patented battery technology ,and I like the resulting vertical integration.
I owned that one a while back, interesting as pretty much the only real Vanadium “pure play”, though I don’t remember anything about their battery plans. Anglo Pacific has a royalty on their mine, FWIW.
My money is on FuelPositive (FuelPositive is traded in Canada on the TSX-V under the trading symbol NHHH.V. In the U.S. FuelPositive is traded on the OTCQB under the trading symbol NHHH.F.) I took this section from their web site:
“”Carbon-free Ammonia (NH3) can help change the world!
The world has discovered the potential of green ammonia to significantly reduce carbon emissions and surpass our Paris Agreement commitments. Only FuelPositive has the technology to make it happen economically and efficiently now.
Our lead product, carbon-free ammonia (NH3), takes air, water and sustainable electricity and converts that into a non-polluting:
Chemical for multiple applications
Fertilizer for farming
Fuel for transportation
Fuel for fuel cells
Solution for grid storage”
And let’s not forget “Lightbridge fuel” if we’re talking 2028 as the target date. LTBR jumped 13% today with news of Australia accepting their patent. It seems to get a boost every time a country grants them patent rights. Best sell on the news, for now.
I GOT RID of QS because it keeps trending Down & Others seem more promising. like NVNXF, which is up 2X since I bot it in July
have you ever check to see how many of these newsletter pitches meet or even come close to the gains they say are possible in their news letters
We track them all, stockgumshoe.com/tracking
Typically about a third do better than the market, 2/3 do worse, and about as many go bankrupt or lose 99% (one or two a year) as come close to the wildly overhyped potential.
THINKOLATOR AND FRIENDS. Travis I want to say what many probably have already said, but since i found your website my smill effort at making a mark in the stock market is up at least 100%. Keep up the outstanding analysis. All The best to you and yours.
Travis, can you comment on the company APPHARVEST? It’s way down from its IPO, however, the seem to be getting to be profitable by 2022, as they can grow year round now on an epic scale. Thanks, Joe
Those 2022 numbers are very rosy, and probably depend on really rapid development of their additional locations.
This was a wild “over promise” story as a SPAC merger, there’s definitely some appeal in their ambitious growth plans… but it’s also very capital intensive and so far they’ve hugely disappointed investors with the big downgrade in forecasts earlier this year. It’s hard to bounce back from that and rebuild trust, and the company still trades at a pretty optimistic “growth” multiple.
I haven’t dug into their latest updates and filings, but that’s my five minute impression at this point.
Appreciate your analysis and write up on QS. Very informative. Given all the positive factors that are known about the future of the enterprise (potential market size, solid state battery design innovation breakthrough in principle, improvements in safety and convenience, endorsement investments by big names, commercial partnerships, sufficient Capital to fund years of Research and Development and experimentation on both the device and the manufacturing production process, etc) a rough estimate of probability of success has to account for the multiple steps and multiple stages to achieve a commercial product. Even if we assign a 95% probability of success for any one step within a given stage and a 95% probability of success (near certainty) for each sequential stage to commercial production as you’ve described above, the overall probability declines quite substantially: p= .95^n where n is the number of steps and stages to achieve commercialization. If the total number of steps and stages is 10 then p=.95^10 which is approximately equal to 0.6 that suggests a 40% risk of failure to reach commercialization based on internal risk factors over which management has some control. The p value of success is reduced further by risks associated with future unknown external threats or variables that are impossible to predict. Future returns on QS stock may be attractively high for VC’s who invested at start up share price valuations but far less for individual investors at prevailing markets prices post SPAC even after the recent sharp drop in QS share prices.