Chris Brown’s presentation on Energous (WATT) at the Kase Learning conference on short selling, 5/3/18.
Chris Brown's Presentation On Energous (WATT)
Pros And Cons Of Tail Risk Funds
Editor’s note: This article is part of a series ValueWalk is doing on tail risk hedge funds. The series is based on over a month of research and discussions with over a dozen experts in the field. All the content will be first available to our premium subscribers and some will be released at a Read More
Good morning. I'm Chris Brown from our city's Capitol. Thank you all for being here. This is truly a joy to present such an amazing group of investors and thank you for getting this really special disclosure reference. So airside capital base in Toledo vanished in August 2000 a predominately bottoms up U.S. micro-cap and we've done pretty well so far. Pretty small though. All right so as I was preparing for this talk I thought about experience I've had a choice to get a Fermi Lab for a couple of weeks or Disney World for one week.
I chose to go to Fermilab and I'm glad that I did. And the thing that I got out of Fermilab is basically the physics chops to give this talk today. So the company I'm talking about is kind of a physics based company and you might have said why is a biology major from Toledo talking to me about physics.
So the thing on the top left there is a foot multiplier 2 base and I actually made one of those. So the thing on the bottom is helps detect particles. So how much would you pay for this business. Revenue is consistently less than 3 million dollars.
Operating income of negative 50 million dollars and shares outstanding constantly increasing anyone. This keeps up. It's zero right. All right. So talk today is on energy corporation. It's a worthless equity that's been hyped to evaluation of 500 million dollars. A lot of the valuation gain happened December 27 and 28 when there was an FCC approval for one of their products that the company just horrifically misrepresented.
And you can see that the big pop in price was not actually a short squeeze shorts like us actually increased our position on the event. What happened was five times the float traded in two days mainly from retail investors it's still very low institutional participation in the stock. So how did this terrible company stock it so high. One the CEO pretty much lies all the time too. There's some partners that give the company about. And so the fellow on the left there is Marty Cupar. He's the father of the cell phone and the father or the fellow on the right is an FCC a former FCC commissioner who now works for Cooley who's been paid big bucks by the company to say nice things about them.
They also have a partnership with dialogue who has basically given the exclusive rights to manufacture chips for the company in exchange for purchasing some stock and warrants into under the market deals. And then Apple is their most intensely publicized partnership. And we'll talk about that in the next page. Most importantly there's been a lot of fake news around this company. So for example New York posting. Now you can charge your phone from up to three feet away. You can't. And we'll talk about that. So if this is so bad why did Apple partner with them. And it basically comes down to two large companies liking call options that are almost free. So Apple's paid Energis very little money.
And Energis on the other hand is completely locked up in several important product categories so cell phones smartwatches are just can't engage with anyone who's a competitor to Apple in those. How long does the agreement last. It's at least several years. And I asked the CEO one on one if what if Apple decides not to release the products but they don't tell you that. I mean you're just locked up until the end and his response was simply they wouldn't do that. All right. So even our firm bought the Energis IPO. Why. It was a really good story we knew we knew people would like the story and we figured it would take them a while to catch on. The fact that this is something that can't technically be done however since the IPO company is up almost ten fold and it's very little progress. All right. So what do they promise to do. Basically it's our effort microarray based wireless charging at a distance and they say they have a novel approach to this. Basically they claim to be able to create packets of energy around your device at a distance when they were coming public.
They said their product was too large to be incorporated in commercial devices but they'd fix that. And what they promised is that they would be able to give you one and a half Watts at 30 feet. All right. That is incredibly hard to do. This is the freeze equation and basically what it shows is the power transmitted is inversely proportional to the square of the distance. So if you have adequate power at three centimeters to get adequate power at three meters you need 10000 times as much power. All right. It can be done.
The physics behind this is not new technology is not new. So this is a 1975 experiment that NASA did and they basically set up this huge Hana array and sent 34000 watts of power nearly a mile the catch to this is they had a 26 meter transmitting antenna and the transmitting it is many multiples of the wavelength of the energy they were sending and they also had a huge receiver they had 17 square meters of receiving Elementz. Obviously you would not have wanted to be in the middle of this beam or you'd have been cooked. All right. So in addition to being large the INS Hannas have to line up perfectly. If you're off by 1 degree left or right or if you're off by 1 degree up or down you basically receive almost no power whatsoever. All right. So anyhow surprisingly Energis is not using large highly directional antennas and are just as FCC approval is for nine hundred thirteen megahertz which is a wavelength of 33 centimeters.
So the catch is to do this in a highly directional fashion you'd have to have a sending antenna several times a wavelength and you can imagine having a few of these in your livingroom it's just not very practical. So what is the company's alleged secret sauce. Well what they talk about is controlling the phase in amplitude of the RF power. It's a form constructive and destructive interference generating pockets of energy in a 3D space so that turn pockets of energy doesn't mean anything to physicists and it doesn't mean anything to people in this space it's just a term they made up.
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