So? What’s BOREF Worth? September 18, 2020September 17, 2020 But first: From Politico: Trump hails ‘manufacturing miracle’ as factories bleed jobs. “The president’s anti-trade agenda and a pandemic-induced recession have combined to shutter factories and accelerate trends toward automation.” A don’t-miss minute — complete with disclaimers — advocating his reelection. (Thanks, Joey!) And now: David M.: “What’s your take on the WheelTug demonstration? And how about the proposed “merger” (purchase) of CNXM? I have to read a 220-page consent document. Also, including possible legal action.” → The only thing I know about CNXM is that you don’t need to read the 220-page consent document. I’m pretty sure the merger goes through whether you vote for it or not. Nor do you need to join the legal action. If they bring it and win, as I hope they do, we’ll be entitled to our share of the proceeds even if we do not sign on as “named plaintiffs.” I first suggested CNXM here at $13.25 and do feel we were misled by management. I suggested it again at half price during the COVID collapse — and on those shares we do now have a nice profit. If you bought both times, you might want to sell the first shares for the tax loss (and still participate in any legal settlement) while holding the second set. But I am clearly no expert on CNXM. I do feel I know a fair amount about WheelTug and BOREF. The demonstration went well. Air Insight: “This event had a feeling of seeing something special taking place.” WheelTug’s partners are excited. E.g.: Total Air Group Supports WheelTug Test Drive at Memphis International Airport CEO of Total Air Group, Tracy Silvius, stated: “We are thrilled to be a partner to WheelTug and assist in developing technology that we believe will have the same dramatic impact within the aviation industry in terms of time savings as the transition from piston airliners to jets.” The local press provided detailed coverage: Memphis airport showcases tug-less taxiing invention. The odds seem better than ever that WheelTug will eventually win FAA approval and begin installing systems and booking revenue. I think it’s entirely plausible that 10 years from now almost all commercial jets will have WheelTug-like capability. Why would they not? The analogy I’ve used is the TV remote control. The invention of TV — like the invention of the airplane — was revolutionary. The add-on convenience of a simple little remote control was trivial . . . and yet until they were invented, no one in the world was able to change channels or adjust volume without rising from the couch to do so. No one! And then, once that capability was offered, within a few years no one in the world would buy a TV without that capability. Who would want a plane that can’t back out from the gate on its own? That can’t park parallel for boarding and deplaning from both front AND rear doors? It’s possible air travel itself will become a relic, thanks to never-ending pandemics, terrorism, or the emergence of safe human teleportation. Bye-bye BOREF. More likely bad endings would include such mundane possibilities as the motor’s proving unreliable in some way (though pilots will always be able to back out from the gate the old-fashioned way, just as, in an emergency, we can always rise from our couch to turn on the TV) . . . or some competitor swooping in out of the blue with an even better solution (though no viable competitor is visibly on the horizon and WheelTug has a slew of patents). I think the most realistic concerns are that this will all take a long time; that airlines won’t easily part with the kind of huge sums WheelTug envisions; and that even as revenues come in lower and slower than hoped, expenses will exceed projections. (It’s called: “real life.”) So with all the remaining risks and potential delays, what is BOREF worth? If the stock is worth $100 in five years — a $500 million market cap — and if you’re satisfied compounding your money at 20% a year, then it’s worth $40 today. (Forty bucks compounded at 20% grows to $100 in five years.) If you require 30% a year, you’d pay $27. If you’d settle for 15%: $50. My own guess — purely a guess — is that BOREF is as likely to be worth more than $100 a share five years from now as it is to be worth less. It has no sales or profits; but many valuable companies have been highly valued before they turned a profit. (Here are five.) It took FedEx 13 years from conception to its first profit. Nine years for Amazon. Obviously, BOREF will never be worth $65 billion, like FedEx, or $1.5 trillion like Amazon. But is $500 million implausible for a company whose innovation has the potential to save more than $1 million a year in each of 17,000 or so 737s and A320s — so, more than $17 billion in annual savings? And that could in effect add 10% or 15% to the capacity of the world’s commercial airports without their building a single new runway or terminal, by reducing the amount of time jets need to sit at the gate? And that would save passengers hundreds of millions of hours each year? BOREF’s most obvious asset is its 58% of WheelTug. WheelTug shares have been privately selling at a $1.25 billion valuation. Not five years from now — now. That doesn’t mean they’re worth that much — but even if they’re not (and the purchasers obviously think they are), might they be worth that much in five years? At which point BOREF’s WheelTug stake alone would be worth $150 per BOREF share. And if BOREF proves its technology works in airplanes, might it find uses elsewhere? And might one or more of BOREF’s other supposed technological breakthroughs prove real? All of which is to say that at last night’s $9.50 close, I’m nowhere near selling any of my shares. (All bought — I can’t stress heavily enough — with money I can truly afford to lose, and still may.) Did you watch that don’t-miss minute advocating Trump’s reelection. Volunteer! Contribute! Recruit poll workers! Vote!