Akoustis Technologies, Inc. (AKTS): $200 Million Company Admits Patent Worth $114K

by Sonya Colberg, Senior Editor - 4/12/2017 9:04:42 AM

Akoustis Technologies, Inc. (AKTS) is now priced at an unsustainable ~$200 million valuation.

That kind of market valuation makes no sense for a risky no-product, old-patent, minimal-revenue, professionally promoted company whose key stockholder was investigated for manipulating stocks.

The Huntersville, North Carolina company is focused on an RF filter patent filed by CEO Jeffrey Shealy in 2000. The company hopes its older technology may eventually compete with well-funded, established companies whose products help wireless carriers reduce dropped calls.

Investors may find the website here of the company, which has not answered our numerous calls and emails requesting comment. However, the Securities and Exchange Commission is considering the information we've submitted.

In this second part of an investigative series (Part 1 is here), TheStreetSweeper presents additional reasons we consider Akoustis stock a major risk to investment portfolios.

*1. Company: Our Patent Portfolio Isn't Worth Much

Regulatory filings state just what Akoustis thinks its patent portfolio is worth ... $114,000!

 

(Source: Company SEC filing)

Yet this patent portfolio - worth about as much as a fancy pickup - is driving the whole company.

*2. Foundering Factory: Losing Millions

The stock has also recently risen on the wings of an Akoustis announcement of plans to buy an old upstate New York factory referred to as STC-MEM. The company trumpeted that a university owns the factory, which it claims historically brings in "about $3 million in revenue."

We found that accountants in 2009 released an audit of the STC-MEM project then called Infotonics. 

The audit shows that the factory revenue, primarily from grants, was $2.89 million.

But what really matters to stockholders is this: Does the factory make money? That's what Akoustis doesn't tell investors. But we will.

 The factory historically goes down the hole ... losing over $3 million:

(Source: Bonadio & Co. certified public accountants; TheStreetSweeper)

That's not all.

Akoustis would have to create 214 jobs and invest about $20 million in the old factory in order to eventually build out the company's nearly two-decade-old filter idea.

Also, Akoustis boasts it might load up on tax breaks from a New York incentive program ... which the company forgot to mention auditors' findings that it is over $10 billion in debt and over the years has produced waste, fraud, abuse and failures.

The STC project was once Gov. Andrew Cuomo's centerpiece tech hub project. Fifteen years later, the semiconductor and wafer factory on 53 acres of land in Canandaigua has fallen far short of expectations. Now the former SUNY Polytechnic university president who championed the project has been forced out and recently pleaded not guilty to federal bid-rigging charges.

Consequently, SUNY Polytechnic’s semiconductor research center and support resources are being kicked to the curb and a well-known analyst indicates the tech hub reputation and dream itself are "in jeopardy."

"A lot of stuff is being shut down there. Companies are trying to distance themselves from the whole thing,"  G. Dan Hutcheson, a Silicon Valley semiconductor analyst told EETimes in January.

 

So Akoustis arrived with a $2.75 million offer (plus agreeing to "assume substantially all of the on-going obligations of the acquired business) for the distressed, snake-bitten property that SUNY Poly and the governor understandably may want to unload and try to forget the whole distasteful experience.

Now, in our view, Akoustis hopes to impress unwary investors with its plans to buy university property and SUNY Poly hopes to impress up-at-arms citizens with its plans to dump that property.

Everybody goes home happy.

Everybody, that is, except the stockholders who recently bought the pricey stock. They likely didn't realize the weaknesses behind the idea: that Akoustis probably can't make money using the old, money-hungry, university-coddled factory to build its old-patent product.

Not everyone's accepting the story. Indeed, institutional investors didn't buy the Akoustis story from the beginning...

*3. Institutional Interest: Absolutely Zero

Indeed, Akoustis stock has no institutional investors. For good reason. The big institutions are too smart to get caught in this web.

 

 

(Source: Nasdaq)

Not exactly a bastion of institutional wealth, "Creative Planning" just bought 300 shares in Akoustis. They're probably very nice folks but the fact that their headquarters share a small building with the local dentist in Leawood, Kansas, population not quite 32,000, doesn't inspire the kind of confidence of say, Goldman Sachs.

We've seen disinterest in stocks from big institutions before. And we've seen institutions occasionally buy some bad stocks. But we don't recall seeing no institutional interest.

*4. The Competition: Big Dogs

Meanwhile, if Akoustis does manage to get into the RF filter field in the future, the big, established dogs who've already snapped up the territory will be waiting on Akoustis with sharpened fangs.

Companies crushing it are Broadcom Limited and Qarvo.

Other competitors in the field include:

*Murata Manufacturing Co., Ltd.  *Taiyo Yuden

*Skyworks Solutions Inc.               *TDK Epcos

 

Akoustis' next challenge: Convince potential customers that someday they can make a Federal Communications Commission-compliant product that is equal to or better than comparables, reliable, not too expensive and can be produced at volume.

Unfortunately, Akoustis states its potential product has not passed one of the first steps. The product candidate has received no market validation from potential customers among lower-tier mobile wireless companies.

"Our technology has not yet obtained market validation from Tier I mobile wireless customers or been verified in commercial manufacturing and our RF filters have yet to generate any sales."

 

*Conclusion

Akoustis Technologies is the riskiest, highest-priced, lowest-worth company we’ve seen in a long, long time.

We can almost understand these little pre-revenue companies that start out with $20 million valuations, later start making some money and gradually rise to $200 million.

But Akoustis has started out with a high valuation that quickly reached nearly a-quarter-billion dollars. Logically, there's no upside left.

We'll keep digging but the only way deal guys in such small companies will add to their fortunes is by selling to you.

TheStreetSweeper expects this stock will quickly drop by about 25% and then tumble another 50% to 60%.

 

* Important Disclosure: The owners of TheStreetSweeper hold a short position in AKTS and stand to profit on any future declines in the stock price.

* Editor's Note: As a matter of policy, TheStreetSweeper prohibits members of its editorial team from taking financial positions in the companies that they cover. To contact Sonya Colberg, the author of this story, please send an email to streetsweepereditor@yahoo.com.

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