Asensio Report on NVEC

Discussion in 'Trading' started by Babak, Mar 19, 2004.

  1. Babak

    Babak

    I provide this just for information sake. Needless to say, do your own DD:

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    March 18, 2004

    NVEC possesses no valuable MRAM technology.

    Does any one believe that Motorola, Inc. (NYSE: MOT, $17.22) has incorporated NVE Corporation’s (NASDAQ: NVEC, $45.75) intellectual property ("IP") patents into Motorola’s prototype “toggle” 4MBIT Magnetoresistive Random Memory (“MRAM”) chip? If so, does any one believe that NVE can successfully claim Motorola has infringed on its patents? And, last but not at all least, does any one really believe that NVE’s IP contribution is important enough to the development of Motorola's MRAM product that it will receive compensation material to NVE? Not us. Or any of the expert opinions we have obtained and reviewed. And judging by their enormous stock selling, NVE's own inside experts also do not believe.

    NVE insiders have dumped almost all of their shares. NVE founder James M. Daughton and Daniel A Baker, NVE's Chief Executive Officer and lead stock promoter, sold 78% and 89% of their shares. NVE's lead investor sold 1.4 million of its 1.5 million shares and three out of five NVE directors have sold stock. Robert Irish, an NVE Director, sold all his NVE shares. Insiders had been stuck in NVE, which had only raised $4.7 million before it merged with the shell of a defunct public company, until the Motorola story became a stock promotion.

    And what a successful promotion! So successful in fact that even the dumping insiders were caught by surprise. NVE's stock promotion seems to have officially started on June 3, 2003 at $6.48 per share. The insiders started selling in June and sold as low as $18 per share only to see the stock rise to $69 per share on January 20, 2004. Only one waited long enough to get the highest prices. And that was Daniel Baker who sold 65,400 shares at an average price of $57.51 on January 28 and 30, 2004.

    On May 30, 2003 the public only held 24% of NVE’s outstanding shares. The insiders have dumped so many of their shares on the public that now the public is left holding 90% of the company. And the insiders? On May 30, 2003 the group of sellers combined owned 73% of the company. Today they own 6%.

    NVE is one of those “the more you know the sillier it becomes” stock promotions. Not that we would ever let a set of circumstantial facts lead us to a conclusion. But, brother what a set of circumstances. Before we tell you the story, let us reiterate that we do not believe NVE’s IP is included in Motorola's MRAM product. In fact, we believe that NVE’s MRAM IP has no commercial value. And we think that NVE's insider selling indicates that they agree with us.

    Now, you might ask: How did these fellows out in Eden Prairie, MN get this done? Well they had an assist. Peter Hebert, the Publisher, and Josh Wolfe, 26, the Editor, of the Forbes/Wolfe Nanotech Report seem to be Daniel Baker's lead proponents. Let's call this pair “H&W.” H&W have promoted themselves everywhere from Investor’s Business Daily to Men’s Health Magazine.

    The Daily Deal wrote on March 15, 2004 H&W “have an outsized capacity for publicity” yet no capacity to buy and hold NVE’s stock. Rarely does an individual whose only known accomplishment is getting Forbes to hype his newsletter, manage to be called a short (5'5") "hype-artist" and "wannabe scientist" in the press. Unfortunately, Wolfe's due diligence is also short, but not the hype. H&W promoted NVE in their newsletter in June 2003, and July, August, September, October, November, December 2003, and January 2004.

    But giving H&W too much credit for this stock’s climb would be a mistake. There exists a set of facts that could be easily used to wrongly lead anyone to believe NVE was materially involved in Motorola's MRAM development. You see, Motorola was just beginning to explore MRAM possibilities, back in 1990, when Motorola made a small investment in NVE. Then in 1995 Motorola entered into a licensing agreement with NVE covering NVE’s patents related to MRAM. And then, on June 4, 2003, coinciding almost exactly with NVE’s stock blast-off and the beginning of NVE’s insider dumping, an article titled "IBM, Infineon two years behind Motorola in MRAM" was published in Silicon Strategies stating that Motorola was 2 years ahead of Altis Semiconductor SA, the International Business Machines Corporation (NYSE: IBM, $93.39) and Infineon Technologies AG (NYSE: IFX, $13.45) joint venture, in bringing an MRAM sample to the market. NVE's first stock promotion gimmick was distributing copies of this article with a stamp indicating that Motorola was an NVE licensee. And sure enough, on October 27, 2003 Motorola announced that it had delivered MRAM samples to customers. Wow. H&W did not have to do too much work spinning facts like these, especially since NVE only had 987,394 shares in the public float when they started their promotion.

    cont´d...
     
  2. Babak

    Babak

    All those facts are old news now. Investors have caught up to Daniel Baker and his say-one-thing-but-do-another stock promotion. NVE's stock began its wholly-deserved return to oblivion. Then surprise. Two days ago H&W used a cameo appearance by Daniel Baker on a Wall Street MRAM research call and an absurd claim that the stock's decline was due to a now-solved problem with Cypress Semiconductor Corporation (NYSE: CY, $21.10) to rekindle NVE's dying flame.

    On March 16, 2004 Credit Swiss First Boston ("CSFB") hosted a conference call titled "Next Generation Memory Drivers - Part 2." The conference call featured Cypress Executive Vice President of Sales and Marketing, Ralph Schmitt and NVE front man Daniel Baker. NVE’s stock rose $3.63, or 9.8%, on March 16 to close at $40.83. Yesterday NVE’s stock closed at $45.75, up another 12.1%. Perhaps NVE traders believe that NVE would share in Cypress' MRAM success. This is not the case. The Cypress-NVE License and Joint Ownership Agreement states that "NVE hereby grants to Cypress a worldwide, nontransferable, nonexclusive, royalty free license." Cypress holds no NVE stock. But we can see why Cypress might want NVE to join them on the CSFB conference call. You see Cypress holds three warrants covering 408,000 NVE shares exercisable between $7.345 and $21.99 per share.

    We believe that Motorola licensed NVE's patents while forming an MRAM patent portfolio early in Motorola’s MRAM development program. This was nine (9) years ago. Motorola has advanced well beyond NVE’s early design. Furthermore, NVE’s patents describe a one-transistor per bit read addressing scheme that have been used in DRAM chips for a very long time. Therefore, we seriously question their enforceability against any chip design.

    There are clear and material differences between the NVE and Motorola designs. Even under the best scenario NVE's patents are hardly the "key inventions" in MRAM development. In fact, other than being early (one could also say dated and underdeveloped) we found no other distinguishing credit to NVE’s IP.

    Motorola has its own very strong MRAM patent portfolio containing over 30 patents by at least eight Motorola scientists who are major IP contributors to Motorola's MRAM development. In addition, Hewlett-Packard Company (NYSE: HPQ, $22.10), Intel Corporation (NASDAQ: INTC, $27.79), Micron Technology, Inc. (NYSE: MU, $15.47), National Semiconductor Corporation (NYSE: NSM, $41.98), SanDisk Corporation (NASDAQ: SNDK, $26.94) and STMicroelectronics N.V. (NYSE: STM, $24.11) all have important patents pertaining to MRAM development. Among Motorola's inventors is the late Leonid Savtchenko, a Russian-educated magnetism theoretician, who is credited with solving a major MRAM development challenge known as "flipping" with his "toggling" patent.

    As written above, this is a "the more you know the sillier it becomes" stock promotion. It all began in 1989 when Mr. Daughton founded a small private company called Nonvolatile Electronics, Incorporated. In its 11 year history Nonvolatile managed to raise all of $4.7 million and lose $3.7 million of the money it raised. On November 21, 2000 Nonvolatile merged with a defunct public company. The public shell changed its name to NVE Corporation. Nonvolatile had a total of $670,115 in cash in the bank before its merger with the shell. The defunct company had $1.1 million in cash prior to the merger. Little wonder the long-suffering insiders dumped so quickly. Immediately after the merger the public held 823,725 NVE shares and the insiders held 2,537,205 NVE shares. Today, thanks to the success of NVE's Motorola stock promotion and the voracity of NVE's insider selling, the public now holds 3,948,160 NVE shares and the insiders hold just 421,175 shares.

    We don’t know why the company’s management is fomenting half-baked theories of how much NVE will receive from Motorola and the value of its IP. We don’t know why they are promoting their stock in such a questionable manner. It might matter that these things have gone on while they sold their shares to the public. But what is important is whether NVE’s stock will one day soon be the low-volume, forgotten reverse-merger, penny-stock it was less than one year ago. And to this, we answer yes definitely. We see no other possible outcome to this otherwise insignificant stock promotion scheme.

    NVE's attraction faded long before its 2000 shell deal. By then Motorola had invested a tiny amount in NVE privately in return for a look and a call on NVE's MRAM work and NVE had failed to generate any material interest in its development program. Even starting with the benefit of the IBM and Infineon MRAM programs, Altis is scheduled to spend about $200 million to develop MRAM. Only the wildest of dreamers could possibly believe NVE and its $4 million technology can compete in the MRAM field. For this reason and many others, we initiate coverage of shares of NVE publicly traded stock with a Strong Sell and Short Sell opinion.

    All Asensio & Company, Inc. reports are covered by the terms and conditions of the mandatory user agreement located at http://www.asensio.com/TermsOfUse.aspx. The statements below are a part of the user agreement whose entirety is incorporated herein by reference. These statements, and all of the statements contained in the mandatory user agreement, are intended to strictly limit our potential liability to you and your possible legal rights to the fullest extent of the law. Readers are advised to carefully read the entirety of the mandatory user agreement and strictly adhere to the directions given therein.

    INVESTMENTS IN SECURITIES, COMMODITIES OR FUTURES HAVE INHERENT RISK, AND A PERSON TAKES SUCH RISKS KNOWINGLY AND BEARS FULL RESPONSIBILITY FOR HIS/HER OWN INVESTMENT RESEARCH AND DECISIONS. Use of www.asensio.com is at your own risk. None of the information contained therein should be construed as an offer to sell or a solicitation of an offer to buy any securities. In cases where there exists controversy concerning a company's disclosures, investors should not sell or buy their shares based on the theory that markets price securities efficiently. Furthermore, investors should not rely on the market to substitute for their own individual due diligence and deliberate decision making.

    All of the information provided by Asensio & Company, Inc. at asensio.com must be taken as a whole and in its entirety. All of the statements on asensio.com involve, concern and are directed at public issues and public controversies of interest to the public at large. asensio.com contains no statements of fact. All of the statements published by asensio.com constitute written opinions and are not provided to assist any individual or entity in making any investment decision.
    Asensio & Company, Inc. · 747 Third Avenue · New York · NY · 10017

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  3. NVEC up 6.19 !!!!!!!
     
  4. Babak

    Babak

    March 22, 2004
    NVE fails to provide any support for its Motorola claims.

    In last Friday's press release, NVE Corporation (NASDAQ: NVEC, $47.70) claimed that Magnetic or Magnetoresistive Random Access Memory ("MRAM") chips are fabricated using nanotechnology and that spintronics is a nanotechnology. In fact, nanotechnology is not used to fabricate MRAM chips and spintronics is not a nanotechnology. NVE had not used the word nanotechnology in its SEC filings or press releases before July 25, 2003. The mention of the "nano" word coincides with the commencement of NVE's newsletter and Internet based stock promotion, which personally benefited NVE's stock selling leaders James Daughton and Daniel Baker. Perhaps NVE bases its nanotechnology claims on its own definition created for stock promotion purposes.

    In the release NVE also said that they "believe" Motorola, Inc. (NYSE: MOT, $16.94) is using their intellectual property and that they "expect" to get paid. Immediately investors have to be thinking: Why does NVE have those beliefs and expectations? If they are so involved in MRAM shouldn't they know this for a fact? After all, NVE didn't say they "believe" they are in nanotechnology or they "expect" to be in nanotechnology. NVE's statements are wrong but at least they were strongly worded. Could NVE be hiding something? Why don't they disclose some facts? Why are they so desperately trying to convince investors? How can NVE admit that their claim was totally overblown now that we know they sold their stock?

    If NVE is as important to spintronics and MRAM's development as they claim their alleged discoveries would be easy to independently verify. They are not. Today, we published two appendices to this research report. Appendix A is titled "NVE is not involved in nanotechnology" and explains why spintronics is not nanotechnology. Appendix B is titled "NVE's MRAM contribution claims are unfounded." Appendix B identifies eight (8) inventors that materially contributed to the advancement of MRAM beginning 148 years ago and leading to the first commercialization last year. Appendix B describes the earliest mathematical achievements and the most recent manufacturing breakthroughs. It turns out that real valuable inventions are easier to understand and more tangible than NVE's MRAM fantasy-duo James Daughton and Daniel Baker want you to know. The development of MRAM's basic technology and commercialization is an extraordinary story of individual scientific achievement, alliances between great companies, government support and international cooperation. It does not include NVE.

    MRAM's history is not a story of nanotechnology. MRAM comes from well understood physics. It involves metal, magnets and semiconductor manufacturing. In this case, knowing that it could be done was not the issue. The memory market is extremely cost competitive. Manufacturing issues and costs still remain MRAM's primary concerns.

    As Appendix B shows, NVE is totally absent from the MRAM story. It took about 15 years after the first GMR was sold in a real memory product (not special use imbedded memory but computing memory) for a semiconductor manufacturer to be able to fabricate a competitive memory chip using spin in metal to replace charges in capacitors. Hundreds of patented and unpatented discoveries led to the new MRAM products.

    Whether you study MRAM's early origin or Motorola's most recent manufacturing work, there is no mention of any NVE MRAM invention. There is nothing that indicates, much less verifies, NVE's claim. On the contrary, the evidence points to the exact opposite conclusion. This is not a rich company in poor company clothing. NVE is a genuinely poor company and those that made up the story about it being rich have sold all or most of their stock.

    Last Friday afternoon's unwarranted stock reaction to NVE's pathetically weak and unspecific press release only serves to raise questions about NVE's seriousness and intent. Even without the benefit of the MRAM facts disclosed herein and in the accompanying appendices, it seems fair to ask why is NVE's management involved in extremely questionable activities if NVE really does posses something of such great value? We remain fully committed to our opinion that NVE possesses no valuable MRAM intellectual property and that its shares are worth no more that one tenth of their current price.

    All Asensio & Company, Inc. reports are covered by the terms and conditions of the mandatory user agreement located at http://www.asensio.com/TermsOfUse.aspx. The statements below are a part of the user agreement whose entirety is incorporated herein by reference. These statements, and all of the statements contained in the mandatory user agreement, are intended to strictly limit our potential liability to you and your possible legal rights to the fullest extent of the law. Readers are advised to carefully read the entirety of the mandatory user agreement and strictly adhere to the directions given therein.

    INVESTMENTS IN SECURITIES, COMMODITIES OR FUTURES HAVE INHERENT RISK, AND A PERSON TAKES SUCH RISKS KNOWINGLY AND BEARS FULL RESPONSIBILITY FOR HIS/HER OWN INVESTMENT RESEARCH AND DECISIONS. Use of www.asensio.com is at your own risk. None of the information contained therein should be construed as an offer to sell or a solicitation of an offer to buy any securities. In cases where there exists controversy concerning a company's disclosures, investors should not sell or buy their shares based on the theory that markets price securities efficiently. Furthermore, investors should not rely on the market to substitute for their own individual due diligence and deliberate decision making.

    All of the information provided by Asensio & Company, Inc. at asensio.com must be taken as a whole and in its entirety. All of the statements on asensio.com involve, concern and are directed at public issues and public controversies of interest to the public at large. asensio.com contains no statements of fact. All of the statements published by asensio.com constitute written opinions and are not provided to assist any individual or entity in making any investment decision.
     
  5. Babak

    Babak

    March 25, 2004

    Father of nanotech rebuffs NVE's nanotechnology claims.

    Prior to July 25, 2003 NVE Corporation (NASDAQ: NVEC, $47.15) had not claimed in any press release or Securities and Exchange Commission ("SEC") filing that it was involved in nanotechnology. On July 25, 2003 NVE issued its first press release with the vague claim that "MRAM is fabricated using nanotechnology." That was the first public mention of the term "nanotechnology" by NVE in a press release. NVE's stock was just $6 per share the month before NVE started making its nanotechnology claims. NVE later added more nanotechnology claims.

    These claims begin just after NVE is added to the Forbes/Wolfe "Nanosphere," a collection of stocks to buy, according to this newsletter.

    An April 30, 2001 Forbes Global article titled "Total Recall" states that "Current DRAM capacitors are 0.18 microns wide; the sandwich in Motorola's best MRAM is three times as large. The article also states "Motorola's MRAMs can hold only 256,000 bits; the newest DRAMs will hold 256 million bits per chip. DRAMs are 1,000 times denser and are not consider nano."

    Dr. K. Eric Drexler is the author of Engines of Creation, a book published by Anchor Press in 1986 that introduced the term "nanotechnology." Dr. Drexler recently stated "The meaning of "nanotechnology" has been stretched to the point of uselessness."

    We contacted Dr. Drexler regarding MRAM. He stated "By the standard implicit in the earlier meaning of the term, no product today fully qualifies, and I doubt that this one qualifies at all."

    An article in the March 11, 2004 Economist states that Dr. Drexler believes the term nanotechnology "is now being bandied about every Tom, Dick and Harriet" or in NVE's case its every Dan, Jim, and Josh.

    All Asensio & Company, Inc. reports are covered by the terms and conditions of the mandatory user agreement located at http://www.asensio.com/TermsOfUse.aspx. The statements below are a part of the user agreement whose entirety is incorporated herein by reference. These statements, and all of the statements contained in the mandatory user agreement, are intended to strictly limit our potential liability to you and your possible legal rights to the fullest extent of the law. Readers are advised to carefully read the entirety of the mandatory user agreement and strictly adhere to the directions given therein.

    INVESTMENTS IN SECURITIES, COMMODITIES OR FUTURES HAVE INHERENT RISK, AND A PERSON TAKES SUCH RISKS KNOWINGLY AND BEARS FULL RESPONSIBILITY FOR HIS/HER OWN INVESTMENT RESEARCH AND DECISIONS. Use of www.asensio.com is at your own risk. None of the information contained therein should be construed as an offer to sell or a solicitation of an offer to buy any securities. In cases where there exists controversy concerning a company's disclosures, investors should not sell or buy their shares based on the theory that markets price securities efficiently. Furthermore, investors should not rely on the market to substitute for their own individual due diligence and deliberate decision making.

    All of the information provided by Asensio & Company, Inc. at asensio.com must be taken as a whole and in its entirety. All of the statements on asensio.com involve, concern and are directed at public issues and public controversies of interest to the public at large. asensio.com contains no statements of fact. All of the statements published by asensio.com constitute written opinions and are not provided to assist any individual or entity in making any investment decision.
    Asensio & Company, Inc. · 747 Third Avenue · New York · NY · 10017
     
  6. Babak

    Babak

    Follow up:

    NVEC rallied to around $53 before falling to around $27 now. I think it has quite a ways to go yet. :)

    *a rare Babak/Asensio stockpick*

    (beat that marketsurfer! :D )

    oh and remember the Nano Index by Merril Lynch (be bullshit) launched in April 2004?