Whenever there is controversy surrounding an investment theme, you know that there’s something there worth taking a look at. We’ve had at least a few readers mention a company called “Scuderi Group” and their revolutionary “Scuderi Engine” which is expected to operate 50% more efficiently than traditional combustion engines and reduce emissions by up to 80%. Let’s take a closer look at the Scuderi Group.
Using technology that has been around since 1914, a man named Carmelo Scuderi developed a “split-cycle” internal combustion engine that functions as both an air compressor and an engine. Consequently, the engine is up to 50% more efficient and reduces emissions up to 80%. Scuderi Group goes out of their way to make sure that you know just how many patents they have covering this technology, with an entire section of their sparse website dedicated to listing out their IP portfolio. The portfolio is a large one, with Google Patents listing a total of 254 patents with the assignee as Scuderi Group. The Company is said to have a working prototype, though in the past they have referred to “simulations” performed as opposed to tests performed on the engine itself. You can read more about the Scuderi Engine in this company brochure which doesn’t appear to have been updated since 2009. Let’s just assume for now that the technology is viable.
The biggest curiosity behind Scuderi Group, and perhaps the root of all the controversy, is the fact that they raised over $80 million in a continuous securities offering that took place from January 2004 until July 2012. Over that period of time, Scuderi Group sold stock in their company to over 400 investors, 90 of whom were not accredited. To make matters worse, Scuderi Group then began doling out the money they received to family members for no reason at all. The Scuderi in charge at the time did things like pay his mom $330,000 for no reason at all and his brother $240,000, with neither of these individuals even being employed by the company at the time. If you bought stock in the Scuderi Group, that sort of callous disregard for shareholder’s interests should be a real cause for concern.
While you can read the lengthy SEC filing at this link, the outcome was a simple slap on the wrist fine of just $100,000 for Scuderi Group. After reading the filing, we came away with the feeling that this is a company that investors should stay far, far away from. The Scuderi Group is also facing a class-action federal lawsuit brought in 2013 by investors. Would institutional investors, or any investors for that matter, want to invest in such a company going forward? What Scuderi might look to do next is to distance themselves from this debacle, perhaps by changing their focus to “power generation and storage”.
Using the powerful Internet archive “Wayback Machine”, we can see that way back in 2011 the Scuderi Group called themselves “Scuderi Engine” and was heavily focused on automotive applications of their technology.
Scuderi Group even went so far as to say at the time:
Of the 20 largest engine manufacturers in the world, 14 are in discussions about acquiring the rights to the engine’s technology.
Fast forward to today, and all those “progress in automotive” press releases seem to have disappeared from the Scuderi Group website. With a homepage decorated with pictures of solar panels and wind towers, the Company now refers to itself as “Scuderi Power” and talks about how “Scuderi power generation and storage systems can provide unprecedented advantages to large consumers of power”, like reducing your electricity bills by 20%. What happened to the focus on automotive? Has this channel already been monetized? The latest automotive update seems to imply otherwise, as a subsidiary of Toyota, Hino Motors, has taken Scuderi Group to court. Apparently, Hino gave Scuderi Group $150,000 for some development work and received nothing in return causing Hino to take them to court to get their money back.
Let’s just assume for now that this lawsuit is water under the bridge for Scuderi Group. The point here is that if you sign a development agreement with one of the biggest automotive manufacturers in the world, and less than 2 years later they take you to court over a “business dispute”, you are simply incompetent and not acting in the best interest of your shareholders. What must other automotive manufacturers think when they see this?
While we view the management of Scuderi Group as completely incompetent based on the facts presented in this article, there still seems to be quite a few strong believers in this company who are hoping for a liquidation event. Are these simply the investors who contributed the $80 million Scuderi Group have
squandered spent on R&D so far? Or believers in the Scuderi vision of a new engine that can revolutionize multiple industries?