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Official inquiry sounds a bit too much. I merely called the IR department for some questions regarding STWA and the status of the TC contracts and whether they could give some kind of timeline on those results. They answered that they couldn't give an explicit timeline at this stage, but mentioned a shareholder had made a video and posted it online showing continued testing. Nothing more, nothing less. I was a bit suprised, but I had no idea that you all would make it such a big deal. I have nothing to prove, and since bulls distrust me anyway, you probably won't believe (I frankly don't care that much). I just wanted to share it and perhaps ask ourselves what we actually know about this video.
Ok, but that still doesn't explain a few things.
Maybe, I need some reading glasses, but I have a lot of trouble finding it in the lease ahah.
http://www.sec.gov/Archives/edgar/data/1103795/000101968713002824/stwa_8k-ex1001.htm
Thanks for your suggestion to go, but I feel obligated to reject your suggestion. Investing is making educated decisions based on facts and weighting probabilities regarding unknown factors. Right now, I still feel that the probability of poor economic prospects outweigh a bullish scenario, and therefore I am short. If orders would start to come in, I will cover my shorts and accept a change in the probabilities (doesn't mean, i will go long though).
I made an inquiry with regard to the status of the TC contract by calling IR, not expecting any reference to 321's video. I have no proof that they said it, since I didn´t audiotape it, but since I am not stating that they did anything wrong, you can believe whatever you want. I was merely a bit suprised by it, which made me think about a more elementary part of the investment thesis: 321's video.
The entire hope of the bulls now rests on 321's video, because officially we only know that TC has terminated its contract without any purchase order or new contract. It seems weird to me that the test stage would take long without any clarity. Theoretically, STWA could keep us in the dark for a long time, since they could hide behind the NDA argument. Therefore, don't expect any orders at the release of quarterly results, but more something along the vague line of continued testing. If TC`s results are taking this long, don't keep you hopes up with regard to KM, because those results could take forever.
Going back to 321's video. I am newer to this company than most of the people on these fora, so I missed most of the context. However, I could never find the exact location of the AOT in Wichita, KS, so how did 321 track it? Is 321 aligned with STWA in any capacity or to TC? Since he is the hope for every bull left, a little disclosure would be nice. How does he know whether the AOT is actually running? And where is this facebook group or page that I should have read according to some bulls, as I couldn't find it anywhere?
Could the bulls help me out with a few questions, as I came into the discussion at a much later date than most here?
How was 321 zero able to find the location of the AOT? I couldn't find any official mentioning of an exact location of the TC AOT in the filings, aside from Wichita, Kansas.
Why does the company refer to a homemade video from a forum poster, when I made some official inquiries what the status of the TC contract is? I find it weird that a public company would do that instead of saying that they are bound by a NDA.
321 zero, are you an employee of Save the World Air?
Transcanada remained suprisingly silent on AOT, despite giving a rather detailed outline of its capital investment plans.
THere is not a separate NDA with respect to the TC lease, aside from a clause that states that both parties can't share confidential testing data, but not with respect to a potential deal or anything aside from the actual testing data. STWA filed a more extensive NDA agreement with respect to the Kinder Morgan lease.
So there is no reason why the company should be able to hide behind the NDA aside from the actual testing data.
Will a deal with TC materalize before earnings? Unlikely
The beauty of the NDA is that management can argue that they cannot definitely comment on the status of the "upcoming" deal with TC on AOT orders because of the nature of the NDA. They can continue to push it out into the future without suggesting anything. If TC doesn't proceed, they can still hide behind the NDA for a long time.
At a certain point, you must argue that the bull thesis has weakened. Simarly, the bear thesis would weaken if strong orders would materialize. In the end, it is merely a stock, not a religion. Sometimes as value investor, you have a thesis why a stock seems cheap, before concluding that the original bull thesis is wrong. There is nothing so dangerous as standing behind a stock either long or short dogmatically without altering your views in the face of new probabilities.
The only hope that you as a bull can have is based on the video. It remains to be seen what the actual reason of that is. It is unlikely that TC would terminate a lease early and negotiate this long over a few potential AOTs that are a simple investment from TC's perspective. Furthermore, they control the bargaining process completely and could completely squeeze STWA, even if they were interested, so a fair market price - even assuming that it works - would be far below the contracted $4.3mln.
What will the bears say? If STWA gets millions of dollars in orders, the short thesis was wrong, as simple as that. It will still be an issue of what revenues and cash flows will settle at, as the current share price already assumes quite a bit of recurring orders.
Absolutely! Everyone keeps assuming that TC has remained an interest. The termination filing says that TC has sufficient information to succesfully test instead of test successfully, a subtle difference.
It seems that the company is diverting attention away from the TC lease by leaking this news plus the application for uplisting. A real contract with TC would at least be a stop of commercial acceptance, but the probability gets slimmer by the day. Unfortunately, the company has to come up with an explanation around earnings, if a deal doesn't materialize.
If AOT was that wonderful and would provide meaningful economic benefits to TC, then it wouldn't blow up the deal. Furthermore, given that STWA needs the deal, it would be willing to accept lower prices just to get it. If a deal with TC doesn't materialize, the KM deal is worthless. If a deal with TC does materalize, a KM lease could amplify the orders.
ahah can't you appreciate a joke. Of course that article can't be construed as a serious rebuttal, even though it raises a few interesting points in general. Nonetheless, it remains true that Tao's articles haven't been used by fellow academics as reference for fellow up research, which is weird if Tao's papers were that groundbreaking.
Heavy Oil Transportation - Can It Be Made Easier by Magnetism?
http://www.earthdoc.org/publication/publicationdetails/?publication=76161
Rebuttal w.r.t. Tao's research methods.
Temple is a third tier university, according to many rankings.
The ranking for the physics department is actually worse compared to Temple's other departments.
http://grad-schools.usnews.rankingsandreviews.com/best-graduate-schools/top-science-schools/physics-rankings/page+5
This, however, doesn't necessarily mean anything for Tao's reputation or for STWA. However, if you research for the most cited physics academians, Tao's name is nowhere to be found. Tao's reputation has been touted as stellar on this and other forums, but often the most important validation of that is citations of Tao's papers and research by fellow academians. If you look within google scholar for Tao's papers between 1991 and 2014 for citations by other academians, hardly anyone aside from Tao himself or fellow authors cite his work.
If you futhermore look at the youtube channel from STWA that I posted yesterday where you see Tao at work in his lab, one can hardly conclude that groundbreaking research was going on there (Tao must truly admire Walter White's outfit).
This is not to bring mr. Tao down, as he must be an intelligent man, receiving his PhD from Columbia. However, don't get carried away with the excellence of his academic career, his research or the reputation of Temple University.
Read section 9 on options and warrants in the 10k. A smaller fraction of the stock options was exercised during the 2011-2013 period, but once you read the comments on warrants that were part of compensation arrangements with consultants and employees, one can see that a much larger fraction has been exercised. Since all warrants are lumped together, it is harder to put an exact number on it.
you should have read it as issuance of warrants / stock options to managements. I didn't imply that the warrants were issued to management.
Assume for a moment that the bulls are right, and TC is going to place a substantial order next week. Of course, the stock will skyrocket, justified or not.
But what will you do, as a bull, when TC and KM don't order in large quantities? What arguments do you have left to hold on to the stock?
And even if everything goes right. Aren't you furious how much management has enriched themselves in compensation against massive shareholder destruction and little R&D investments?
It is so great to have those like you on this board with so much time to devote to helping us avoid this horrible company.
I must have imagined that the AOT is still attached to the TC pipeline.
No, it is unclear yet what the implications are. If it was not, the stock would have been at zero already.
I must have imagined that Tao published such great results of the AOT.
Great on paper, but again certain holes in his methods, as is ascertained by other academics in the field.
I must have imagined that STWA is aligned with the very prestigious Temple University.
Again, Temple is really not that prestigious. Many other leading tech companies are affiliated with far more respective universities. Plus the university can fund these department from their patent fees.
I must have imagined that Kinder Morgan will be placing an AOT on one of their pipelines.
They will place one, as a test. For KM the initial few lease payments are such a small figure. We should be talking when KM places massive orders after the testing period, and not before.
I must have imagined that STWA did what only 1 out of 1000 start up companies have done, signed a contract with more than one multibillion dollar companies.
Again, it is formidable what great marketing can do. And STWA has been great at that. Again, the initial lease payments require little financial or reputational risk.
I must have imagined that STWA was invited to present their technology at a leading oil industry conference.
Again, being introduced to a conference doesn't mean that they participants are buying the idea. The idea in theory sounds wonderful, but commercial success is highly doubtful, since it has been tried many times in the last few decades and was not adopted because large oil companies couldn't make it work.
Thanks for helping me keep my imagination in check.
Thanks for all the great DD
Have you contacted KM then? At this stage, without testing data, they will not give a proper answer. Plus they are bound by the NDA, so they will not be forthright to outsiders about the effectiveness of AOT.
Actually, investing is my full time profession, and this company is an interesting case to watch, because either a lot of people lose their money over time, as the share price dwindles, or the bulls are unexpectedly right, and we are watching the birth of something special. You know my position though. Other companies in the portfolio have less contention. This is almost akin to the Herbalife situation, where bulls and bears have such extreme opposite views.
Between the end of 2008 and the end of 2013 (just a random sample, as the effect is even more extreme since inception), the outstanding shares increased from 62.9mln shares to 176.4mln shares.
http://www.sec.gov/Archives/edgar/data/1103795/000101968714000875/zero_10k-123113.htm (read statement of shareholders' equity)
The increase can be attributed to issues equity from convertible debt, exercised stock options, exercised warrants, compensation and settlements.
If you subsequently, read the proxy statement (http://www.sec.gov/Archives/edgar/data/1103795/000101968713004192/stwa_def14a.htm), then one can see that nobody breached the beneficial shareholder treshold, nor was it visible in management ownership. One can safely assume that a vast majority of the increased supply has changed hands since. After the initial hype in 2012, the share price has been on a steady decline, confirming that there has been a net supply of shares in the market. The increase in share price in 2012 and the huge increase in outstanding shares, created an unbelievable market capitalization in 2012-2013.
Furthermore, this company has never received any first tier (or even second or third tier) institutional support, nor from hedge funds, oil service companies, venture capitalist or wealthy indiviudals who are willing to buy 5% or more, even as the company has come closer to large scale commercialisation of its AOT product (your words).
Again, Tao's research was critized in the past, nor did his work on oil viscoscity reduction by pulsed electrics find any relevant citations in subsequent research.
I don't want to beat a dead horse, but this company has spent a little over $10mln since inception on R&D (of which a portion was compensation reclassified as R&D) versus a multiple on stock compensation, in a highly unprofessional lab circumstances (as can be seen on the youtube clips), and has created products on a technique highly critized by academics, dismissed by oil companies over the last few decades as ineffective. Yet, STWA's competitors are spending a substantial multiple of STWA cumulative R&D budget per year, and couldn't make this work. The validated test results by third parties are highly doubtful as the results can be misconstrued by a changed baseline. Similar reductions could initially be seen by Elektra, yet the company has largely given up on that pipedream.
The decrease in share price has caused substantial issues in the future for the company's capital raising efforts, as fewer options and warrants issued in the past will be in the money, plus it now requires more dilution to cover the company's ongoing negative free cash flow.
Of course, everything will be gone and forgotten if the company receives mega orders that will create substantial free cash flows. In case, it doesn't, this company is in serious trouble. If TC doesn't order, STWA doesn't have to release its test data, plus TC is not allowed to do it either, since it has signed a NDA. Similar situation with KM. Both companies' opportunity cost to try it on a very small scale and garner data is low, but so is getting out of the lease. Yet, for STWA, this is a make or break moment. In the past, when it is was bringing Elektra on the market, and other products before, it could always fall back on other unproven concepts in the pipeline, such as AOT. Those other products have gone, and now everything hings on the commercial success of AOT. If these orders don't come through, it is the end for STWA.
I agree that the fact that it is merely a stand alone website with a purchased domain name is weird and perhaps suspicious, but on the other hand the facts laid out there are very interesting. I think a lot of findings are more fact based than a lot of bullish articles I have read. Either some allegations are true or they're not.
I am not him, nor is it my website. I came across that link today and thought it summed up a few items very well. I do think it is good reading material for the bulls, as it counterbalances some bullish arguments laid out before.
I also just found an old youtube channel from STWA; https://www.youtube.com/channel/UCFFpmBMw2yqeCZ9dXXIb_Mg
One has to be pretty confident in one's ability to market a product, when you see how rudimentary and low budget STWA's R&D processes have been. Furthermore, it is very obvious that Professor Tao hasn't received support (mostly criticism) from fellow academics. Everyone agrees with the fact that if this technology was possible, that it should be the holy grail, but that Tao's research is full of physical holes.
It is very easy to say that there are large investor groups out there, but without actual filings, we could take this with a grain of salt. If several groups are working together and own more than 5% of the outstanding shares, they are required to file a 13g or 13d filing as a group. If not, they have committed securities fraud. It is not easy not prove that they are actually working together though.
A substantial portion of the increase of the outstanding shares in the last decade has come through the issuance of warrants and stock options to management, but a substantial portion of that increase has over time been sold off or expired out-of-the-money.
FUrthermore, the company has even mentioned several times in its latest 10-q that it needs to raise substantial sums of capital in the future to fund ongoing expenses and bring AOT to market, so the float will increase even more. There is a risk for current stock option and warrant holders that if the stock would continue its current trajectory and drop below $0.50 and then below $0.30, that their variable compensation packages become worthless, so they are incentivized to keep the stock price afloat.
It is funny, as I went through the 10-ks and 10-qs of the last 7 years, how eerily similar the projections for commercial success were for Elektra and MAG ChargR, before completely dropping those efforts.
Highly inaccurate, since the company is required to report its beneficial shareholders in its annual proxy statement. According to the latest proxy statement, one could hardly suggest that a large portion of the float has been purchased.
If there are shareholders who are not mentioned in the proxy statement, they are in violation with SEC reporting regulations.
Because I had never heard of this forum until I saw a thread on ZERO on which I wanted to post a response. Nor do I have a desire to use this forum for other stocks at this stage. This has been the most active board on this stock, otherwise I wouldn't have bothered to make a profile.
That is not true. The float is very high as the cumulative insider and 5% owners ownership is low relative to most companies. It is true that new marginal buyers have to buy at higher prices to get shares, but you could buy millions of shares if you want to.
It is interesting to see that a lot of options and granted warrants are out of money below $0.50, so management has a real incentive to stop the price from dropping.
I would really like someone to check that email address.
The bull/bear ratio is definitely in favor of the bulls. Yet, the price has declined rather sharply. Given the high probability of high success, I am wondering why not more investors or potential takeover targets have acquired shares around these levels, yet the price continues to languish here without high volumes.
The bulls will say that everyone is awaiting for these orders to come through, but in order to be bullish that should be a given, yet nobody is buying more around these levels.
sheelagh_ forsyth@transcanada.com ; Is there an error in the email address posted in the 8k, as I get an error message when I try to send mr. Forsyth an email.
I only have a very small short position (about 0.24% of my portfolio) in STWA, and I follow it with enormous interest to see how the story plays out.
The quote that short sellers have to cover their positions at the end of each month is simply inaccurate. Shorting OTC stocks is simply not always ideal, but that is not to say that you should be positive.
All the uplisting comments over the last 24 hours are highly irrelevant to the company's future and doesn't necessarily have to indicate good news on the horizon. The minimum requirements are so low, since the company only has to have an equity position of $1mln, which it can easily achieve by selling some securities. Therefore, I don't see why the company's application won't be honored.
The more important question remains: where are the orders? Each day passes without news on the TC lease renewal. Remember that STWA has no incentive to remove the AOT machine from TC's site, since that would imply that TC is no longer interested. Let's wait for some news, but if no news arrives before Tuesday, then you should be at least suspicious of the situation.
Now, it is a show me moment for the company. Either the arguments layed out before on this forum amplify the upside or the downside.
It is getting a bit strange why we haven't heard from the company on any updates with respect to TC.
The upgrade today is a major non-event. This company has had a tendency in the past to release seemingly positive news to counterbalance negative news. In July, it was the the signing of KM and now it is the upgrade to counterbalance potential negative news regarding TC. Let's first wait for a TC announcement before, we can say whether this is good or bad news.
One the hand, upgrading to a better marketplace would enhance the company's ability to sell securities in the future. On the other hand, it will likely bring along more scrutinity with regard to the business model.
You are right that we should focus on the future, but certain elements from the past are just critical in order to understand the personalities involved. Those articles about our dear professor have absolutely no bearing on the company whatsoever.
It is just me or it is fishy that the company signed the KM lease on the same day of the TC lease termination. It indicates to me that STWA wanted to prevent the market from panicking by suggesting that they have other contracts lined up. As to TC, I am curious what the company will or won't say about it. Regardless of whether you are bullish or bearish, we should hear from the company very soon what the results are.
Great, you are referring to two articles from 2010 and 2011.
If Tao was this revolutionary scientist, why would he settle down for a glorious institution like Temple University, which surely ranks higher than MIT, Harvard and numerous other crappy universities
I am very familiar that great companies can arise with limited budgets and small teams. However, all of them are accompanied by brilliant men and/or women supported by a good team and a vision. I can point to nobody within STWA or Tao's research team that would embody that.
Plus as mentioned before, this technique has been in existence for decades, but was never picked up by the major oil companies because the results showed no statistically significant reduction in the viscosity.
Therefore, it is highly unlikely that TC or Kinder Morgan will close large contracts. As I have mentioned before, if STWA can get regular orders that amount to a sustainable revenue basis/ cash flow basis that would support the current share price, I will say that you were right. However, will you at least grant the possibility that this company is a laughing stock if these large orders don't materialize?
Furthermore, I find it highly unprofessional of any company that feels the need to update its shareholders on the specific companies it is talking to. Furthermore, it tries to appeal to foreign parties that could not be considered to be in the major leagues.
I get your point. However, the mere presence of patents doesn't indicate or refute statistically the economic validity of the AOT product techniques.
$5.2 million in R&D is a pittance, as is suggested before. Therefore, it should at least raise eyebrows, how on earth such a low figure can produce the greatest energy application since the beginning of time.
Large oil service companies like Slumberger, Halliburton and Baker Hughes have specialized marketing departments and the ability to produce in large quantities at attractive market rates. They wouldn't wait for this company to do the heavy lifting, if this product has the ability to become this large, as all the synergy effects would flow their intrinsic value directly. Besides, very few product lines that Halliburton or SLumberger have the kind of revenue streams that the bulls are projecting for STWA if things are going well. I don't understand why it is very hard to understand that the probability of buying into the facebook of the energy service market is so low given all the dubious facts and using common sense versus the extraordinarily large probability of it being another gimmick by STWA resulting in nothing but shareholder value destruction.
If the orders will flow in, and the company can post sustainable revenues and cash flows, I will definitely wave the white flag and cover my short position and give credit to everyone on this forum.
It is just beyond me how people can much credit to the technical reports posted by STWA, even though they are verified by third parties, because the baseline can easily be adjusted to fit the eventual outcome.
This company has spent $5.2mln in R&D between 2009-2013 versus a multiple on that on executive compensation, and has hardly a credible technical team to support groundbreaking research and product development. If AOT was truly that revolutionary with that little capital spent on actual R&D and has such a small team to support these efforts, why would all energy companies or energy service companies with much larger R&D budgets and professional teams be unable to come up with similar results.
First of all, we don't have any orders yet from TC. Nor is there any indication that KM will extend this lease agreement. Besides, if this product was that revolutionary, why wouldn't any large energy service company have purchased this company on the cheap in the past? Perhaps, because the product viability is not what the bulls hope it is.
There is still a lot of room to fall to zero over time. I simply don't get it why the bulls are using personal attacks without coming out with fundamentals.
Bytheway, I was not asking for you to give me the numbers to help me decide whether to buy it. I am just daring any bull to come up with realistic sales and cash flow projections to justify the current market cap of $104mln.
Bytheway even if the TC and Kinder Morgan are going through as some bulls are expecting, it still doesn't justify the current market cap. No matter how you skin this cat, there is no way how you get to a discounted cash flow value of $0.58 per share. Besides the outstanding number of shares will continue to soar coming two years, as the company raised its ability to issue shares substantially and it will continue to burn through cash operationally (even if it has sales, it would have to spend a fortune on marketing expenses to garner enough clients).
There are real oil service companies with a market cap around $100mln that have sustainable cash flows in the order of more than $10mln, so paying $104mln for a business development company with a very shady past in terms of management, failed products is just beyond me.
I became a member on this forum, as I was reading this thread, and felt compelled to react as the claims a lot of bulls are making are unfounded and have no bearing to the long term value of this company.
I don't mind going long or short on a stock, as long as the fundamentals can support my decision. I am leaning towards a short position here.
Because it doesn't matter whether you buy Coca Cola, Disney or Save the World Air. You as an investor must make an assumption about the future run rate of Zero's revenue and cash flow trajectory. I personally think that the probability of AOT becoming a viable commercial trajectory is extremely low - hence the zero value - but even if it becomes moderately successfull, there is no reason to assume that cash flows go up to $8mln a year. Besides, this company needs to generate $8mln in free cash flows to justify the current share price, assuming that the price doesn't rise from these levels, plus it shouldn't issue more shares, otherwise the necessary free cash flow per year needs to increase accordingly.
You can ridicule me all you want, but please outline bull thesis of why you think this company is worth $104 mln based on current and future fundamentals, because I can't get there.