So Friday afternoon there was this press release from Boeing – ‘Boeing Completes Evaluation of Borealis Cool Chips Technology’ – and Borealis stock went “boing!”
Boeing seems to have concluded that the company’s claims may actually have some basis.
(“Cool Chips™,” according to Borealis’s web site, “are solid-state devices that pump heat to produce cooling, refrigeration, or air conditioning. They are small, lightweight, nonpolluting and noncorrosive and are projected to be more efficient than any existing thermal management technology.”)
And what that means, to this layman, is that . . . well, if this preposterous claim may have merit, perhaps Borealis’s other claims have merit as well.
One of those claims, you will recall, is a significantly more efficient electric motor that they call the “Chorus™ motor” – which a Canadian elevator manufacturer last week announced it would license for the world’s elevator market. (“We are confident that elevators using the Chorus™/Beckett Technology will increase the reliability of tomorrow’s elevators,” Beckett was quoted as saying.)
So I’m thinking, hmmm. That’s elevators. Don’t other things use electric motors as well? What about all those damn golf carts? And what about the fork lifts at Costco that put ten tons of tuna up in the rafters, out of reach? And trains? Haven’t some of them been converted from steam to electricity? And isn’t there some kind of motor in my refrigerator?
And then you scroll a couple of inches further down the Borealis web site and come to “Power Chips™.” These, claim the company, are devices – similar to Cool Chips™ – “that absorb heat to produce electrical power. They are silent, nonpolluting, scalable, portable, and can operate anywhere there is a source of heat. We expect them to replace most existing technologies for generating electricity.”
Neither Boeing nor Beckett nor anyone else so far as I know has leant credence to that preposterous claim. But if there are grounds to think that the Chorus™ motors and Cool Chips™ might actually be real, and economical, who knows? Maybe Power Chips™ could have merit as well.
(The company speculates that, “[b]ecause Power Chips™ generate power by absorbing heat, including body heat, they will extend the usefulness of portable devices such as cellphones and MP3 players; maybe even PDAs. People will be able to produce their own power while sitting, walking, or jogging. And Cool Chips™ will enable laptops to run cooler and more efficiently.”)
And, yes, if you keep scrolling down the web site, you come to a few other throwaways, unconfirmed by any credible source I know. There’s the little item that would revolutionize the world’s steel industry. And there’s the disclosure that the company owns billions of tons of two kinds of metal ore principally used (at least by me) as Scrabble words. (“The magnetite is very large grained and as such is very friable,” claims the site, which makes me think there may be some kind of Cooking Like a Guy™ angle in it for me. Even though, technically, I once knew what friable means.)
So here’s my point. There has to be some horribly disappointing conclusion to all this, for the simple reason that, as I have told you repeatedly for nearly two years, I own a ton of this stock. (It was about $3.50 a share when I first wrote about it, and then jumped from $5 to $8 Friday afternoon. Boing!)
Still, maybe now that Boeing and Beckett have lent it a whiff of credibility, it would not be completely irresponsible to imagine how one might go about valuing this thing.
The first thing to say is that it remains, in my view, even after these promising signs, highly, highly speculative. You should absolutely not invest money in Borealis (traded under the symbol BOREF on the “bulletin board,” which is why your broker may not immediately even be able to find a quote for you) that you cannot truly afford to lose.
The second thing to say, in my opinion – and I stress it’s only my opinion (and that “Wrong” would be my middle name if my middle initial were not P) – is that if you happen to have bought 100 shares at $3.50 a while back, you should absolutely not rush to sell your stock here at 8 or wherever it goes this week. (Knowing this wacky, wacky company, the stock could go back to 2 by the end of the week, but I can’t imagine why it would.) Because the point of this wild speculation was not to get a double or triple. The point was to make many times your money.
But what is this thing worth?
Well, if it turns out that Boeing and Beckett have been “had” . . . or that insurmountable problems arise in actually trying to commercialize these technologies . . . or that, though real and commercial, management somehow manages to snatch defeat from the jaws of victory . . . then it is worth zero.
Let’s assume the chances of that are 90%.
But let’s also assume there is a 10% chance that one of its claims proves out as envisioned. Remember, as regards Power Chips™, the company “expects them to replace most existing technologies for generating electricity.”
It’s pretty hard to imagine that, if real, the company’s patents would not be worth a couple of billion dollars. I know people worth a couple of billion dollars. Krispy Kreme is worth a couple of billion dollars.
Borealis claims to have just under 5 million shares outstanding and no debt. So it’s divided into 5 million slices, valued at $8 per slice, when the market closed Friday. About $40 million for the whole pie.
If the pie were actually worth a couple of billion dollars instead, then the stock would be worth $400 ($2 billion divided by 5 million slices). But given the probability I snatched from the air – the 90% chance it will all be a complete bust – you’d lop 90% off that $400 a share and be left with a rational value, accounting for the likelihood of failure, of $40.
If the chance of failure is actually 99% instead of 90%, then the stock might rationally be priced at just $4 – unless you think the company’s claims, if true, would ultimately be worth a couple of tens of billions of dollars, in which case you’re back to $40 even with a 99% chance of failure.
Isn’t this fun?
I have zero technical background with which to evaluate the true chances of success, let alone the actual value Borealis could realize by licensing its technologies to power and cool the world. I truly have no clue what will happen.
(Well, that’s part of the fun, I suppose. As is the notion that if viable, these technologies would make the world more efficient and prosperous and improve its air quality.)
And I still expect to lose my money.
But with Boeing and Beckett having weighed in, I don’t think this is quite the preposterous speculation it once was. I won’t be selling at $8. And, should it ever get to $40 – one-tenth the value of Krispy Kreme – I’m not sure I’ll be selling there, either.
* * *
“I got it purely from smoking.” – George Harrison, speaking in 1997, when his cancer first appeared. Harrison died in Los Angeles on November 30. He was 58. (Thanks to Mike Defert for passing on this quote from CNN.com.)
“The Bush administration sought to use anti-terrorism legislation, rushed through Congress in the wake of the Sept. 11 attacks, to shield U.S. tobacco companies from foreign lawsuits alleging cigarette smuggling and money laundering.” – An Investigative Report of the Center for Public Integrity, November 29, 2001.
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[It would be splendid if someday] economists could manage to get themselves thought of as humble, competent people, on a level with dentists.~John Maynard Keynes
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