There is nothing more rewarding than going back to an old Real Money column that worked and re-reading it.
Thursday, I was reading a press release from Nano One Materials Corp. (NNOMF) and it spurred me to re-read the column I published on NNOMF on RM Dec. 11. Nano is one of those rare birds in today's froth-filled market; a technology company that actually owns a value-added, proprietary technology. In Nano's case, the company's patented One-Pot process allows for coating of the cathodes of lithium-ion batteries with a cobalt-free, nickel-rich substance that greatly reduces the degradation that is often seen in lithium-ion batteries over multiple charging cycles. Electric car batteries do get worse as they are used more, and the battery-management software that major OEMs use essentially improves battery life-cycle at the expense of charging time and maximum capacity.
Today's BEVs operate based on one big trade-off. Nano's patented coating technology could make that trade-off smaller by producing a much more robust cathode architecture. Nano's process also produces savings in materials costs and reduces the need for difficult-to-acquire materials like cobalt. So, it's a great story, it's a pre-revenue company, and the ADR, NNOMF, closed at $2.88 on Dec. 11, the day that my article was posted. Well, a week later, NNOMF, went on a torrid run, hitting a high of $5.17 and, after somewhat of a pullback, sits today at $4.23.
What happened? On Dec. 18, Nano issued a press release noting that the company had: Entered into a cathode evaluation and benchmark agreement with an American based multinational auto manufacturer to jointly evaluate Nano One's cathode materials for automotive lithium ion batteries
At that point, NNOMF stock went on a rampage, and speculation naturally turned to the identity of that American-based EV manufacturer. Is it? Could it be? I asked, too. Obviously Nano One management is unable to provide details for competitive reasons, and doing so would be revealing inside information.
If the market is assuming that it is Nano's fellow West Coast (Nano is headquartered in British Columbia) company, Tesla (TSLA) , then that is a stock-moving assumption. Again, I have no information for or against. Nano has had working agreements with non-auto companies like China's Pulead (since 2019) and France's Saint-Gobain (2018) and has listed Volkswagen (VLKAF) among its corporate partners on its Corporate Factsheets, documents produced well in advance of the Dec. 18 announcement.
Tesla and VW are the clear leaders in global BEV sales in 2021. The other American-based multinational auto manufacturers have been busy either producing electric cars that don't sell well and have been subject to frequent recalls (GM's (GM) Chevy Bolt,) being late to the party (I am hearing good things about Ford's (F) Mustang Mach-E, though,) or, most gallingly, keeping Tesla alive by buying ZEV credits from them -- this is exactly what Fiat Chrysler (FCAU) did in 2020, although that entity is now part of a larger global auto group, Stellantis (STLA) .
The bottom line, though, is that BEV batteries should be much better. Musk's inability to reveal even a single innovation of note at Tesla's much-hyped Battery Day in September shows that even the world's geniuses occasionally need some help. Nano's team, led by CEO Dan Blondal, may not be posing for magazine covers, but they are addressing a problem that faces the world. It's not just an auto problem, either. There are lithium-ion batteries seemingly everywhere these days, but they use materials that are sourced from countries that use labor forces that people in the industry would rather not talk about and, just as importantly, current cathode architectures simply break down too quickly.
As I noted in my first RM piece on Nano, there IS room for a better mousetrap here. I think Nano has that, and that led me to do the financial research that I always do before buying a stock. Nano's sourcing of non-dilutive funds from both the Canadian federal and its provincial government has been a boon for Nano shareholders. These funds allowed Nano to create a working, if small, factory in its hometown of Burnaby, British Columbia to demonstrate its One-Pot process.
There is soooooo much capital that is looking for green ideas these days. Nano has done several private placements in the past, but the time for worrying about this company's access to capital is long gone. It's time to start calculating the cost of capital and the true value of this company's technology. The stock market is supposed to do that every day, but 2020 was a master-class in how inefficiency rules today's markets. Just remember that inefficiency works both ways. Truly innovative companies are quite rare, and if you own stock in one, like Nano One, just make sure you don't sell too quickly.
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