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Theranos CEO Elizabeth Holmes Finally Faces Criminal Charges

It's been some time coming, but the CEO of Theranos is finally facing criminal charges for fraud, as the WSJ's Carreyrou repor...

Thursday, September 20, 2018

Meredith Perry No Longer uBeam CEO


Meredith Perry has stepped down as CEO of uBeam, the controversial wireless charging startup she founded in 2011.

uBeam wants to commercialize its technology via licenses to embed it in third-party products, and Perry was not viewed as the right person for that task.

If only someone senior in the company could have told the board and investors that back in 2015...

Perry will remain a "senior advisor" to the company and on its board of directors.

I didn't think that Perry would ever willingly step down, so if I am correct there, this was forced by investors after failing to meet milestones. I'm certainly surprised it happened this early after the last round. More comment as I learn more.

You can find my uBeam posts here.

Wednesday, September 5, 2018

It's Dead, Jim - Theranos Edition

Yesterday I posted pointing out the Theranos website was down, and wondered if that meant the company was defunct. Today, the Wall Street Journal confirms - Theranos to dissolve. From the article:

In the wake of a high-profile scandal, the company will formally dissolve, according to an email to shareholders. Theranos will seek to pay unsecured creditors its remaining cash in coming months, the email said. 

Most of Theranos’s two-dozen remaining employees worked their last day on Friday, Aug. 31.

All told, investors in Theranos have lost nearly $1 billion.

I think it's all been said in previous Theranos posts. Nothing more to add really. Now to see what happens in the court cases.

Monday, September 3, 2018

Magic Leap - Product Delivered and Oculus Founder Reaction


In late 2016 I wrote a post on Magic Leap, the company that had raised billions of dollars for its Augmented Reality (AR) product, which they promised would be so far beyond anything else it would be like magic. Journalists fawned over them, willingly signing NDAs just to get a peak and then allow the company to decide what they can say (hint: if a journalist admits they signed an NDA with the company they are covering, they are simply, IMO, a stenographer and mouthpiece for PR whitewashing). It was amazing, and we had wonderful insights into the amazing character of the founder Rony Abovitz, and learned that he met Beaker from the Muppets, a factoid so compelling it could be used 18 months later to fill column inches and avoid talking about the technology and failure to deliver.

By the end of 2016 a lot of questions were starting to be raised about the extent of their promises, and that videos they had claimed were actual AR turned out to be more a rendered version and not truly representative of what would be seen by a user. The company got very defensive, understandably, and the CEO put out a statement that users would get an experience "powered by unicorns and rainbows" (It looks like that blog post has been taken down, but excerpts are here).

The usual cohort of big-company defenders sprang into life, proclaiming that hardware is hard (Is it? Really? Thanks for that, never would have guessed), those criticizing don't understand, to have faith (Faith? This isn't a sports team or deity, it's a technical product and business) etc. I'm sure the oft-quoted "Man in the Arena" speech was used to silence those who dared question. I've never quite understood why individuals leap to the defense of multi-billion dollar companies (yes, I did it here with Verily, my point being not to defend the company but to try and point out the difference between doomed "Mars Shots" held up as fait-accompli and difficult but achievable "Moon Shots" that are honestly explained) As usual, they focused on the "they are trying, you shouldn't be mean, what are you doing?" As an example:

"I don't get why we live to shoot down people who try something new and ambitious. Why we get this urge to say 'No.  Stop. You can't be good.' Why we jump on them as soon as we see a chink in their armour and are proud of ourselves for it...

We should be praising companies and people that try. Especially new companies that want to break the Google/Apple/Microsoft mold we are currently trapped in. We should celebrate their success and encourage them when they struggle. We should acknowledge that ambitious things are hard and not expect too much of them (something I am certainly guilty of)."

Yeah - it would be nice if they acknowledged these things are hard to the point of being decades away upfront and not lie about what they have already achieved. That's the thing about lying to people, they tend not to like or trust you when they find out. It's a natural reaction...

Anyway - it's nearly two years later and Magic Leap are finally releasing a product, their Magic Leap Creator One, and for $2300 you can get the package with the eyewear (Lightwear), the portable/wearable computer/GPU that drives it (Lightpack), and the handheld controller. Along with the $500 "professional development package" this is broadly the same price range as the Microsoft Hololens, their AR offering, which came out 2 years ago. Various tech media have reviewed it and given it a resounding shoulder-shrug, and mostly "Meh, nice start, might be awesome in the next version though". I'd love to review it myself, with a more technical eye, but quite frankly I'm not going to pony up $3k for the privilege. Fortunately, someone with a lot more understanding of the in-and-outs of VR and AR has already done this.

Palmer Luckey, the founder of Oculus VR (now Facebook's VR company), has weighed in with his review, and it's hardly full of praise. Now as the founder of a rival company, there is room for skepticism, but read the review for yourself, it's pretty clear about the concerns, where it succeeds, and where it doesn't. To briefly summarize his views:

  • Motion tracking method is a poor technical choice that causes issues, worse than competition
  • Controllers are hefty and not ergonomic, depart from industry norms
  • Lightpack is well designed and built
  • Lightwear visual quality does not live up to the PR expectations
  • OS is on a par with an Android watch, no more
  • The only rainbows are artifacts in the visual field

There's an explanation for each of his points, it's well reasoned. He praises them where they deserve, and it seems at the end had it not been for the ridiculous PR and billion dollar funding the response might have been "Nice first shot, a little better than the Hololens, great to see some competition".

Luckey makes points beyond the technical though, and that's really the bit I want to concentrate on as it's part of the larger picture of tech funding and tech media coverage. He shows this image that was used by Magic Leap in promotion of their tech, and comments on it.


"Above is a telling picture from a piece Magic Leap did with Wired magazine a couple years ago, back when they were still hyping up scanning fiber displays.  See the fancy-looking, high-tech light up  strands?  They don’t do anything.  It is just electro-luminescent wire.  It looks great to casual observers, but does not hold up to any kind of scrutiny from people who are in the know."

Basically, you're being lied to. Shiny things and glitter are supposed to make you say "ooh" and "aah" and think it looks cool. But there is a more insidious side to this, as once you are invested in liking it, thinking it's awesome, when an expert comes along and rubbishes it, you take it personally. Like the victim of a con, rather than admitting you were duped, you double down and take the side of the conman. From then on, you are a member of a "tribe" and it becomes "us against them", the "believers vs the heretics" and it's no longer about the tech or the business, but about belief. You're far enough in the hole you're just going to keep digging. Once you're there, there is no amount of data or evidence that will budge some of these people. Look at Tim Draper even after Theranos has been proved to be a fraud, he's still claiming it was just because a journalist and the government were out to get the CEO.

There are other, invisible, costs to this type of hyped startup. To quote from Luckey's post:

"Their current offering is a tragedy in the classical sense, even more so when you consider how their massive funding and carefully crafted hype sucked all the air out of the room in the AR space... It does not deliver on almost any of the promises that allowed them to monopolize funding in the AR investment community."

This echoes a point I have been making in this blog over the last couple of years - certain companies like Theranos or Magic Leap come to the table with bold claims of advancements vastly beyond what anyone else offers, with "Star Trek" levels of capability. Their charismatic founder gets puff-pieces in the tech press, with little scrutiny of the actual technology - which, of course, is a closely guarded secret you can't be allowed to see. They get huge amounts of funding, and the common wisdom quickly becomes "They've already won, how could you compete with them?" Theranos are clearly in the realm of fraud, Magic Leap perhaps is more "extreme exaggeration", but the chilling effect on entrepreneur funding is the same at the outset.

To quote from my last Magic Leap post:

"It creates the standard by which all other companies now must be compared. Imagine you've a small company with solid VR technology that actually works and can be delivered as a product, but when you present it to a VC you're told "Magic Leap already beats that - I won't invest, there's no market". Because you are honest, you don't get funding and your company never takes off, we as the public don't get the benefit of that technology, and the VC's investors (like pension funds) don't get the benefit of the profits. Worse, it encourages the less-than-honest founder to "exaggerate" capabilities and exacerbates the problem. As a society we all lose from this."

And this is the key for me - on the one hand you can't blame a company for putting the best spin they can on what they have, it helps with fundraising and recruitment, and harms potential competition - however there is no excuse for the tech media (at least the ones who claim to be reporters and not in it for page clicks alone) to enable this, nor for institutional investors to fund in a way that encourages the less-than-honest (or above-average delusional).

Perhaps a worse outcome is that when the over-promised thing under-delivers (or delivers fraud), it taints the entire sector for investors and potential employees alike Sure, Magic Leap finally got a product out, but it's was a resounding "meh" and with $2 billion in funding, you really have to work to screw up one delivering something. But what if that something is a negative for the industry overall? As Luckey says "That is not good for the XR industry."

How many advances have we lost because media and investors allowed the PR departments of companies to bamboozle both us and them into ignoring a small but capable and honest company? If you're in engineering, you know of many people working on great technologies that struggle to raise because they just don't lie, or are better at the tech than the pitching. It still confuses me that professional investors heavily bias their selection towards the well-connected, gifted presenters and fundraisers, rather than those with the actual capability to deliver a realistic if bold vision.

Is It Dead Yet? - Theranos Edition

A reader points out that the Theranos website can no longer be reached, it looks like it has been taken down. They had indicated they may be out of money (at least the minimum to meet contractual requirements) by the end of July. 

So is it finally an ex-Theranos? Most likely, yes it is.

Saturday, August 25, 2018

Startup PR 101: Planting Stories and Gaming Data

Given the name of this blog, it's hardly surprising that I spend time talking about how misleading PR from any company can be. Most of the time I don't blame marketing for pushing the best possible narrative they can get, if the product is pretty meaningless and it's really on the press, investors, and public to look at it with a skeptical eye - which sadly is a pretty rare event. Where it gets shady is when the marketing "white-washes" their desired story through a third party, often media looking for the next scoop, to be able to pretend it isn't them making these bold claims, but rather a neutral bystander. Where it gets illegal and immoral is when "facts" are simply fabricated and planted in the media, especially if it's during fundraising or for the purpose of manipulating company share price or valuation. Most of it is pretty blatant, and when you see it up close and personal, it's amazing how easily people fall for it, or even how company "fanboys" evangelize based on this and will not hear otherwise from "heretics". 

While there is a pretty high profile case of this out there right now, since so many column inches are already spent on it, I thought I'd highlight this technique using a recent tweet from VC Josh Wolfe of Lux Capital. For those of you who don't already, I'd recommend following him, he has a lot of very interesting posts and insights that are worth reading. Here's the start of it, the fully unrolled version is at the base of this post

The basic premise is this - the founder of Red Hat (now a ~$25 billion company) needed to gain credibility for his product, so he essentially gamed a 'study' of high Linux user growth, and got a small Linux journal to quote him. Then he managed to get BusinessWeek to quote the Linux journal, and suddenly this made-up statistic had all the authority of being stated in a prestigious national publication. He abused the lack of fact checking and diligence to plant an idea in the media as if it had substance, and used that to help promote his own company.

Is this OK? He didn't really lie, no-one asked him for corroborating evidence, so it mostly falls into the realm of "amusing anecdote".  As the author say "This kind of stuff happens ALL THE TIME" and it's pointless to try to stop it in most cases - press just need to be more careful and the public need to be more skeptical. When the stakes get higher such as with safety, or actual investment, then it's much harder to turn a blind eye to this - if investment was raised based heavily on this, and while specifically quoting that statistic, that is moving towards the illegal.

When it starts to matter is something of a grey area, but sometimes it's just pretty damn clear. Let's take WorldCom, a telecommunications and internet backbone company from the original dot-com era around 20 years ago. By the late 1990's they were claiming that internet usage was growing at 1000% per year, and this widely quoted (though rarely challenged) statistic drove (mal)investment in many other companies. A readable story on this can be found in an industry publication, but to quote from a 2003 Yale Journal on Regulation article:

WorldCom’s false Internet traffic reports and accounting fraud encouraged overinvestment in long-distance capacity and Internet backbone capacity. Because Internet traffic data are proprietary and WorldCom dominated Internet backbone services, and because WorldCom was subject to regulatory oversight, it was reasonable for rival carriers to believe WorldCom’s misrepresentation of Internet traffic growth. WorldCom’s accounting fraud may have destroyed billions of dollars of shareholder value in other telecommunications firms. 

How did this statistic get justified? From the industry publication, Light Reading:

Here's how it worked, according to the former WorldCom employee: WorldCom would hook up new customers with connections capable of handling, say, up to 1.5 Mbit/s of data, knowing that for most of the time the lines would only carry a fraction of this amount. WorldCom would then use the 1.5 Mbit/s figures, not the actual traffic figures, when citing Internet traffic growth statistics...

"The myth of Internet traffic doubling every 100 days seemed to be based on (i) the fact that such growth rates really did hold during the two-year period 1995-1996, and (ii) WorldCom making misleading claims in subsequent years,” 

So like the Red Hat founder, the numbers were essentially made up, and the laziness of readers and media taken advantage of. In this case, that the company was FCC regulated gave the misleading data a stamp of approval it otherwise would not have had - something that 20 years later other technology companies like Energous remember. Now some did call this out, for example here in this 1999 report from AT&T Labs:

"The growth rate of traffic on the public Internet, while lower than is often cited, is still about 100% per year... these claims can be correct only if something unusual is happening to the WorldCom network... Reports, which claim 1,000% growth rates for the Internet, appear to be inaccurate today..."

but no-one listened to the sensible data and fact driven analysis because it wasn't so exciting (I feel their pain). In the end the con at WorldCom, which extended into accounting and beyond just exaggerated PR, resulted in bankruptcy and eventual purchase at a fire-sale price by Verizon. The CEO, Bernie Ebbers, was found guilty of fraud and conspiracy and was sentenced to 25 years in jail (if you're wondering why a white collar crime got punished, see the "may have destroyed billions of dollars of shareholder value" quote above). I do wonder if the willingness of a company to be lax with the truth on smaller details like PR is a more public sign of a willingness to push the limits in accounting and other areas.

Why does this matter? In this case, WorldCom data pushed investment by the public in an area that ended up oversupplied, and when the crash came (it was a dot-com and telecommunications crash back in 2001, not just dot-com) it caused great pain for companies and employees that had to find new businesses and jobs - and to re-re-quote "may have destroyed billions of dollars of shareholder value". Companies in other areas that may have been more viable in the long term didn't get funded, and what they could have done either lost or delayed. Mal-investment has an invisible cost in what doesn't happen, and in the loss of trust in the system. In the end, the system (kinda) worked, but if this had been caught earlier then that pain for others could have been avoided.

What's even more hilarious is when you get two companies in the same industry trying to out-compete each other this way on stats, covering performance that neither can actually achieve. It's like setting two mirrors facing one another, it just reflects off each other into infinity, and ridiculousness. From another post on companies playing the media:

In the past, I've sat inside a company watching the CEO engage in a war of fantasy performance stats and delivery dates with a competing vaporware company, using the tech press to launch salvos of ever increasing capabilities. When the enemy returned fire with a further 'improved' product, there was panic at the top and demands made to engineering that our product get better or timelines be shortened - statements from those trying to be rational, such as "No. Their numbers are just as made up as ours.", garnered a mix of confused and annoyed looks.

Neither company has, to my knowledge, released a product since then and in part this is connected to these inflated performance promises. (And two years later, as of August 2018, still hasn't happened)

So when you read something in the media that seems to be too good to be true, remember that it might be that "truth isn't truth".


Sunday, August 19, 2018

Mailbag: Questions on Energous

I've been asked some questions on Energous and my recent posts, and rather than answer in the slightly-annoying-to-reply-in comments section here, or in private email, I thought I'd just answer them as a post in themselves. Nothing startlingly new here, for those who have read my prior posts, except for one thing. In the earnings call, CEO Rizzone talked about devices at the 5 to 15 Watts level, previously they'd claimed up to 5 Watts and 15 feet, so if he truly meant Watts, that's quite a bold new claim.

1) Has Energous implicitly conceded it cannot generate significant charging power in the near field, ergo its new focus on tertiary products?

I'll start with the most important point - this company has no products, and in my opinion, never will. To say otherwise is to play their game. Everything is turned on its head compared to other companies, all IMO of course. If the thinking of most of Energous' detractors is correct, the goal is not to release a product but to maintain interest in share purchase by large institutions, not to develop technology but to offer the fantasy of safe at-distance wireless charging, that marketing is the true innovation and money earner in the company, and engineering R&D is simply the necessary expense to maintain the illusion it's about products and technology. In summary, it's a very well run marketing company with large R&D expenses that is successfully extracting millions of dollars a year for the insiders.

Now to the 'technology'. I'm going to start covering the 'at a distance' application - basically the non-contact version, since I'm not sure you meant "near field" when you said "near field", and there are multiple definitions of that term being used. In physics terms, near-field and far-field refer to the regions of interference from radiation emitters. In simple terms near-field is close to the emitters where the field varies extensively (it's bumpy) while further out in the far-field it varies inversely with distance (it's smooth) - the image below from Wikipedia shows this. Where this transition happens is relative to the size of the transmitter and the wavelength of the radiation.


So for Energous there is the "contact" version of their charger, the "miniWattUp", which they position as a competitor to Qi, except it's less efficient, slower at charging, has no existing infrastructure, and isn't available (there are multiple product announcements that never make it to market, such as with Myant). Then they have the claim of "at-distance" charging, such as the "long range" device they've been promising for years at 15 feet and up to 5 Watts (now 15 Watts apparently), and the FCC Part 18 approved "mid range" device that will send at best 30 mW at 0.9 meters to a single device, requires a safety cutoff, and also isn't available.

I'm also careless with the use of the terms here, so in part I'm writing this to force myself to be more consistent - the confusion from Energous I think is deliberate, as it helps them with allowing the public to think whatever they want of the technology, rather than making them see it as it is.

Now to actually answering the question:

Energous seem to be careful not to bluntly lie, but let ignorance and laziness of press and investors do the work for them in drawing incorrect conclusions they want from what is said. For years they hinted about a "Tier One" they had a deal with, that they did everything bar say was Apple, until they finally had to give up on that one following AirPower last year - there's a post on some of that here. They deliberately confuse everyone by talking about "WattUp" which is a branding term for all their "products" such as the contact, mid, and far range devices. They also give demonstrations of products that are not FCC approved and exceed the SAR limits to get higher power levels and have people associate with the approved products. I cover some of that here.

In summer 2017 the CEO was already dialing back expectations in specific statements:

“As long as you’re in that 15-foot range, you’ll be charging. Small, small amount of energy. It’s not charging super fast, like you would be plugged in the wall, but a small amount of energy, trickle charging it. And as you put it down closer or farther away, the amount of power changes.”

I cover my opinion of the journalism that let him get away with that statement and no follow up here.

Rizzone says this again in January this year, in a Barron's article

As for five watts, “I don’t see it happening at 15 or 18 feet,” concedes Rizzone. More likely, he thinks Energous will be shipping at the end of 2019 systems that can charge devices such as wearables and smartphones at that distance, but perhaps only with a watt or two, perhaps only hundreds of milliwatts. 

Despite these statements, Rizzone makes claims in the earnings call this month that would lead people to believe 5 to 15 Watts charging is coming. It's no wonder people are still thinking that somehow you'll be charging at the same rate as a wire from the wall. If Energous ever end up in court on fraud claims, they can point to this and say "See, in major interviews we said it was a trickle charge, we never lied, they just interpreted it another way"

Regarding the contact version - The FCC reports for the latest contact device, the 2ADNG-NF130, shows two antenna each able to transmit just shy of 1 Watt. I assume they are at 90 degrees to one another to try to improve performance with receiver position. Given Qi charges at 5 to 7.5W there is literally no way, even at 100% efficiency, for this method to challenge the established market leader. FCC documents show this system charges at a maximum of 300 mW, so a tiny fraction of what is needed, and at no more than about 15% efficiency (Qi is usually 70%ish).

Now does anyone think that the far range transmitter is going to be better than one that's in contact?

So to answer the first question - they seem to almost deliberately confuse terms like feet and Watts, and give differing statements at different times. When Energous have no choice, or are on the record, they downplay performance and obfuscate. They have to know it won't work at the multi-watt level, there is no question there, but what can they badger the FCC into allowing, especially as it seems they have contacts at the top like Chairman Ajit Pai willing to break the normal rules for them. They have to keep this gravy train going for as long as they can, so let the rubes think the next great release is 18 months out perpetually. One thing I'll give to Energous, they are geniuses at how to milk this market.

Next question:

2) Given your assessment of its RF based technology and its limitations re SAR compliance, what could the basis be for Rizzone's claim on the call of achieving 5 to 15 watts for midfield?

Now let's get the first thing out the way - as with all at-a-distance wireless power transfer - is sending 5 to 15 Watts possible? Yes, of course it is. But you do not want to be anywhere near that thing, as it will be hideously dangerous to anyone around, and highly inefficient. So it is possible, just not in any vague sense practical or within SAR limits.

So in the real world, the basis is 'None'. It was always fantasy. This is like me claiming I can run a 3 minute mile, but I just need to train harder and I'll soon get there, maybe another 18 months... Now Energous claimed the 15 feet for the "far range" device in Jan 2015, to my knowledge this is the first time anyone has ever claimed 15 Watts for Energous. Either a slipup by the CEO, or a sudden increase in performance for this so-far nonexistent technology.

The "mid range" device was the one that got Part 18 approval last December, and only goes to ~100mW max, 0.9 meters max, at safety limits, so why would they be able to charge >50x faster at longer ranges? See the quote above where they admit it's less than a wall charger, so not even 5 Watts. Yes, Energous are inconsistent, but that helps them, confusion benefits their message as most people give up.

Looking at the physics, I don't think there's a practical combination of size and safety that results in an even vaguely useful amount of power received (impractical, maybe). That doesn't mean that they won't keep this deception going IMO, and pretend something ridiculous that games the system is coming and will have the fanboys salivating - but in any practical sense it will be pointless. Now, here's what he said in the call:

We expect to see the full impact of this next generation of chips towards the middle of next year, when we anticipate the first product releases to the consumer using our high power WattUp technology for quick charging and applications requiring 5 to 15 watts of charging power.

So that's just not going to happen. It's a year out, minimum, same as all their claims, then it's for applications that require 5 to 15 Watts, he doesn't say they'll actually provide it. Maybe the chips will do 5 to 15 Watts, but the antenna and rest of the system won't. This is definitely a "hopeful" statement and probably can be justified because they keep asking the FCC to approve their 5 to 15 Watt (feet?) device and keep getting told 'No, not safe'. I expect as the end gets closer, the statements will get a little riskier and them less careful about blatantly lying (see recent statements by CEOs of well known tech companies for examples...)

Next question:

3) It seems odd that Dialog would highlight its relationship among others with Energous in its latest press release. Merely justifying its investment and partnership seems unlikely to be the only reason; isn't there something material the partnership could realistically produce?

Yeah. Dialog. No one gets why they did this. I liken them to Safeway and Walgreens with Theranos, where stupidity at the CEO level over-rode all internal advice. They had warned it was possible they were going to lose some of Apple's business, and perhaps were desperate for a 'must have' technology to replace and got suckered, or maybe they knew it was a scam and after the share price hike got their money back out at a profit (looking at their quarterly reports, I don't think they did). I have no idea, it might be a great business school case study when this is all over. As for their statements, note that they make no press releases on Energous since January, and in quarterly reports they say the minimum they can and still be compliant with disclosure rules. This is not a relationship they want to promote right now.

Overall with Dialog I'd say "Stop trying to apply logic and sense to this decision, it's not there". Anyone who has worked in large businesses knows that even when there is a ton of money on the line, what the coal-face workers know are dumb-assed decisions still get made.

4) What do you see Energous doing next?

I see them continuing what they've been doing for the last few years, until the market or the SEC says they can't. What does this mean? Basically, gaming the system and abusing the poor diligence of both investors and press, to raise money from a hopeful public. If I had no scruples, what I'd do is try to find a way to weasel around the FCC rules on Part 18 on my long distance charging to get something that sends 10's of mW over 2 to 3 meters. Perhaps something impossibly large, say a 1 to 2m square array, to keep the W/kg down for SAR, and pushing the far-field boundary out for 'contained' energy. Maybe a safety cutoff variable with charge rate so at any useful rates no-one can be in the room, and if they can it charges at the sub-mW level, but the press and public will not understand that. It would be utterly useless and impractical, something that would never be viable as a product, but the press and investors will believe, because they have no idea what's actually just happened. (Alternatively, I'd get it approved under Part 15 at the sub mW level and then claim Part 18 is coming). Products will be announced for 18 months out, and that they've decided to cancel the contact and mid-range products to concentrate on the long range one, hence managing to excuse how they failed to deliver upon promised products.

At that point, stock price will spike, and they'll a) have the insiders sell their current holdings, b) raise more capital via stock, up to $75 million at the boosted price, to keep this thing going another couple of years, and c) reward themselves with more stock and bonuses. IIRC the CEO gets large bonuses if the market cap spikes beyond $1 billion (a $38.70 stock price assuming no more dilution). We may then see a company with a market cap of >$1 billion, with no products, and revenues in the high 5, low 6 figure range.

Basically, expect something to happen to goose the stock price. This trick worked last year, why not do it again? When someone is rewarded for a set of actions, they are incentivized to repeat. In the end, this stock is going to zero, IMO, but that doesn't mean it's not going to be a rollercoaster until then.

(Repeating the seemingly obligatory statement - I have no financial position, short or long, in Energous or any related company)

Friday, August 10, 2018

Energous Raising $75 Million?

In addition to their standard 10-QEnergous submitted a Form S-3 today, indicating that they are looking to sell up to $75 million of equity in the company, coming barely 6 months after their earlier $40 million raise (from a 2015 S-3 and then an amendment in January 2018). With $37m in the bank as of last month, and a burn rate of near $13m a quarter and statements they will increase R&D spend, I had guessed they'd be raising soon but thought it might be nearer the end of the year. It seems they think now's the right time, perhaps before negative press catches up with them and sours the public. They do not have to raise all this at once, it can be done over time, but given they've set the price at $14.05 I expect much will be done soon.

This likely gives the company another 5 to 6 quarters of operation, which in conjunction with cash in the bank will keep them going until mid 2020. Given that around $4m of equity based compensation goes to the team per quarter, that's another $32m or so of extra cash in their pockets.

Interestingly this comes just after I heard reports of the CFO presenting at Oppenheimer, and apparently he was awful - weak, unenthusiastic, and got ripped to pieces by multiple tough questions after his talk. At least Rizzone is enthusiastic about what he's doing!

A few days ago the company indicated it had revenues of $200,000 per quarter and its major product release was still 18 months out. The 10-Q shows they have debts of just short of $200m to get to this point. Hardly compelling for a company with a $350m market cap.

Last time Raymond James acted as distibutor and made $1,000,000 from the sale (2.5%). Who's making the money this time around? The gravy train keeps rolling for at least another two years...