Nanalyze

The Long Road to Graphene Commercialization

We’re all familiar with the concept of Gartner’s Hype Cycle which says that any given disruptive technology will experience a great deal of hype before everyone forgets about it and real progress starts being made. As technologies progress through the cycle, business models change, and leaders often end up becoming laggards. – the evolution of 3D printing being a great example of this. As adoption can take a while, we like to check in about once a year – at a minimum – to see what’s happening for any given technology. Imagine our surprise when we realized that it’s been more than two years since we last wrote about graphene in our article titled What’s Up with Graphene Stocks? Remember Graphene?

We’re not going to repeat the miracle properties of graphene. The whole “put a sheet of cellophane on a pencil and make an elephant stand on it” thing is interesting in the same sort of way that we find the Mandela Effect interesting, but it’s not something investors have been able to make much money on. Here’s how the more popular graphene stocks have performed since our last article on the topic in May.

 Company  Ticker IPO Date Return Since May-2017 Present Day Market Cap
Directa Plus (LON:DCTA) May-16 +18% $59.83 million
Haydale Graphene Industries (LON:HAYD) Apr-14 -83% $8.43 million
Applied Graphene Materials (LON:AGM) Nov-13 -82% $10.53 million
Versarien PLC (LON:VRS) Jun-13 +81% $195 million

Compare those returns to the broader NASDAQ exchange over the same time frame (+40%) and it’s clear that retail investors haven’t missed much with the exception of Versarien. Haydale and AGM have been absolutely decimated, and any time a stock takes this trajectory, we typically don’t try to catch a falling knife. Then there’s Directa Plus with a positive return, but nothing that beats the broader market. Still, historical stock returns say nothing about what progress is being made towards commercialization. In order to see what’s happening in this space, let’s take a look at the news coming out of Directa Plus and Versarien. (All numbers in USD unless otherwise stated.)

Directa Plus

Click for company websiteJust days ago, Directa Plus finalized their $4.5 million purchase of a 51% stake in Setcar, a Romanian company that provides a range of services aimed to solve environment issues like waste cleanup and such. The two companies have been working together for a number of years supplying environmental services to the oil and gas industry. “We look forward to growing the business using our next generation, graphene-based Grafysorber adsorbent,” said Directa Plus which plans to rename Setcar to “Directa Environmental Solutions.”

The company’s half-year report filed this past September reported revenues of $984,296 and losses of $1,957,001. It also provided some color on progress being made in three primary areas of commercial graphene applications.

  • Environmental – Strategic decision to develop a full decontamination service – not just a product – for the Company’s Grafysorber oil absorber product to international oil and gas markets.
  • Textiles – Exclusive agreement with Loro Piana for G+ technology – contract has a minimum value of $880,092 mainly weighted in 2020 and 2021. Exclusive agreement with Alfredo Grassi to broaden existing collaboration in the development of graphene enhanced workwear and military outerwear.
  • Composites and Elastomers – First commercial test of an asphalt concrete, Ecopave, confirming that G+ products as an additive will extend the life and resilience of asphalt.

The possible use of Directa Plus’s graphene asphalt on Britain’s M25 made the news recently, and one wonders just how much graphene needs to be added to see some benefits and just how meaningful those benefits might be. While progress is being made in each segment, it doesn’t seem like anything to get overly excited about. Let’s see if the recent acquisition can result in some meaningful revenues.

Versarien

We’ve never actually taken a proper look at what Versarien does, but they came across our radar on more than one occasion based on feedback from our readers. So, we had one of our MBAs drop by a Versarien shareholder’s meeting last September, and it was indeed a full house. Investors are very interested in what Versarien is getting up to, and that’s evidenced by the action in their share price over the past few years. Shares spiked in fall of 2017, and have been on a volatile ride ever since, though the technical analysts out there might say we’re seeing some “consolidation” now.

Versarien stock price action

Source: London Stock Exchange

In looking at Versarien’s revenues, there has been some growth over the past five years though that’s stalled between 2018 and 2019. The below table shows their revenues (in GBP) over time along with shrinking losses which is good to see.

Versarien revenues over time

Source: London Stock Exchange

Says the self-described “great British success story” in their 2019 annual report, “the mature businesses provide stability for our graphene-based subsidiaries as they grow and develop.” If the mature graphene businesses are generating a stable $11.8 million a year in revenues, let’s hope that the immature ones can do a whole lot better than that.

Versarien defines two primary business segments as “Graphene and Plastic Products” and “Hard Wear and Metallic Products” with revenues split about evenly between the two. Below that, they’ve carved up the company into a series of subsidiaries that they are adding to via acquisitions and restructuring.

A list of Versarien's subsidiaries

Source: 2019 Versarien Annual Report

The list of agreements and collaborations Versarien spells out in their latest annual report shows that they’re actively getting out there and trying to commercialize their graphene products, but as the company says, “our focus is now to build further on the collaborations made during last year, and to progress these relationships into orders.” We may delve into some of these in a future article on this company if our readers show sufficient interest in it. Note that international investors who take a position in Versarien are also getting exposure to the British pound which adds another element of volatility – or as we call it in the world of finance, risk.

XG Sciences

Click for company websiteReaders often send us interesting insights on companies that we can’t publish because it’s all just anecdotal. Around the time we published our last article on graphene, someone who might be considered a subject matter expert in this space mentioned the merits of Versarien alongside some less than favorable comments about a company we talked about a long time ago called XG Sciences. If you’re looking in from the outside, progress seems to be happening. Ford is using their graphene for automotive applications, Dow Chemical has extended them $20 million in financing, and they’re developing graphene products ranging from oil additives to concrete to 3D printing filaments. However, a closer look at the financials shows all these efforts just aren’t translating into a growing stream of revenues.

XG Sciences financial filings

Source: XG Sciences

Considering that XG Sciences has sold materials to over 1,300 customers in 47 countries since 2008, it doesn’t look like any of these graphene applications are seeing traction that translates into meaningful revenues. For the nine months ended September 30th, revenues have halved while losses have doubled when compared to the same time period in the year prior. If you’re holding shares in the company, you’re kind of stuck, since they don’t actually trade on any exchange. However, this means they’re required to file financial information with the SEC, so we can all take a look at how much progress they’re making – or not.

Conclusion

We can’t just look at what’s happening with publicly traded companies, as most of the innovation for disruptive technologies – especially when slowly plodding up Gartner’s slope of enlightenment – comes from startups. That might be another place to look for graphene commercialization progress, but right now the whole thing just feels like it’s heading the way of carbon nanotubes. When trying to figure out what technologies our small team of MBAs should be focused on, we need to consider opportunity costs. While we’re trying to figure out why graphene can’t seem to make much traction – aside from what it will soon provide for some cars on the M25 – technologies like synthetic biology and artificial intelligence are moving full steam ahead and disrupting entire industries.

A cursory look at what new “graphene stocks” have come online since we last researched this space show a whole bunch of new “resource companies” moonlighting as the next big thing. While other disruptive technologies show their progress through double-digit compound annual revenue growth, publicly traded graphene companies like to tease us with lots of “exclusive agreements” and “memorandums of understanding,” but no meaningful revenue growth. Graphene’s been around long enough now for everyone to have kicked the tires, and we’re all still waiting for the killer app. If you’ve developed that killer app and it’s selling like hotcakes, drop us a comment below, else we’ll check this space again in 2021.

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