Why Archer Materials Stock Should Be Avoided
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Want to know the easiest way to make $100,000? Take a million dollars and invest it in any mining company that’s decided to pivot into the latest exciting technology theme. It’s almost a rite of passage for newbie retail investors to view such ventures as “a possible ten bagger.” They’re only parroting whatever drivel it is they’re being fed that keeps them in the bag holder corner – waiting and hoping.
In our recent piece titled Rigetti Computing Stock: A Pure-Play on Quantum Computing, we talked about how there are only two publicly traded pure-play quantum computing stocks out there – Rigetti (when their SPAC merger completes), and IonQ (IONQ). Of the many quantum computing startups out there, just two have chosen to go public. Our piece on Quantum Computing Stocks Are Having a Moment talked about the many private companies dabbling in quantum such as:
- PsiQuantum, Quantum Machines, Seeqc, ProteinQure
- D-Wave, 1QBit, Cambridge Quantum Computing, QxBranch, Rigetti Computing, QuintessenceLabs
- Bleximo, Q-CTRL, ColdQuanta, QC Ware, Strangeworks, Zapata Computing, Xanadu, GTN Limited, Qindom, Intelline
- Optalysys, MagiQ, Eagle Power Technology
A week after we published that update on quantum computing stocks, we published a piece titled Why Quantum Computing Inc. QUBT Is Not a Good Stock. It’s mainly because QUBT is throwing off far too many red flags, and they’re not a contender in any way, shape, or form. Another company that’s trying to elbow its way into the quantum computing domain is Archer Materials (AXE.AX).
About Archer Materials Stock
When graphene was the disruptive technology du jour, we saw so many graphene miners trying to catch that hype train that we had to write about it in a piece titled Graphite Miners are Not a Play on Graphene. If graphene producers can’t manage to sell their product because graphene hasn’t achieved the commercial demand that investors expected, then any firm claiming they can mine a whole bunch of graphite, then turn it into some super-quality graphene products, is selling vaporware. One company that tried pulling off the “our graphite mining claim will produce graphene-enabled products” thesis was Archer Exploration (now Archer Materials). Below is the first press item on the “News & Media” section of the company’s website from July 2017.
The company was hanging their graphene-enabled hat on a mining claim called “the Campoona Project.” Several months later, they “acquired a graphene and graphite online marketplace” called Carbon Allotropes and appointed the founder, Mohammad Choucair, as their new CEO. Dig into the details and you’ll see that the consideration for the purchase was what amounts to a $176,788 USD bonus for the newly hired CEO. The last press release that year talked about government approval for mining “the Campoona Project.”
The following year, dozens of press releases hinted that their Campoona graphite was on the cusp of commercialization. That summer, lithium-ion batteries and graphene electronic inks were produced using the magical Poon graphite. The icing on the cake – a legally binding agreement with a leading German biotechnology company for the development of an electrochemical biosensor. Going into 2019, future prospects were positive, albeit scattered all over the place, and the company had struck gold – literally:
Our prospects for 2019 are very positive. We will undertake our maiden drill program at Blue Hills where we hope to make a new copper gold discovery close to Adelaide. At the same time, we will continue to develop the quantum technology, human health and reliable energy parts of the Advanced Materials business.
Credit: Archer Materials 2018 Annual Report
In August of 2019, the same news was released again. Poon graphite can be used in lithium ion batteries. Months before that, it was printing human antibodies on graphene biosensors. This completely scattered “dabble in everything that’s currently being talked about on the news” approach is a massive red flag, especially when it involves a mining company with no meaningful revenues. Remember that biosensor they were working on? As of last year they’ve added some 3D printing to the mix.
While Archer spun their wheels trying to commercialize graphene products like everyone else, they were also weaving a tale about how they planned to become a player in quantum computing. Eventually, the quantum story took center stage.
All those great mineral resources Archer was talking up for the last four years must not have been that valuable. They’ve now been disposed of in the form of a new company that’s being taken public – iTech Minerals – which touts the exact same “biosensors produced from Campoona graphene” value proposition, but with a $14 million USD market cap. Archer Materials has now transformed into a $247 million tech company.
Turns out all those mineral resources weren’t worth what the company claimed, and we’re expected to believe that all work they’ve done around filing a patent in multiple jurisdictions and some letters of intent constitute nearly a quarter of a billion dollars worth of value.
Archer Enters Quantum Computing
In the latter half of 2018, Archer started adding quantum computing to their list of value propositions. As you would expect, a lot of over communication accompanied their latest pivot – like three press releases relating to a single licensing event with The University of Sydney.
- May 2018 – Archer to enter exclusive negotiations on quantum technology IP with The University of Sydney
- Aug 2018 – Key license terms for quantum technology IP finalized with the University of Sydney
- Dec 2018 – Exclusive license obtained for breakthrough quantum computing IP
Since then, the company has released a relentless barrage of press releases, news articles, and updates that talk about every little iota of perceived progress they claim to be making. Like others of its ilk, there’s a major focus placed on that one big piece of intellectual property they plan to use to capture the billion-dollar quantum computing opportunity. Archer joined the IBM Quantum Network which any firm can apply to join, and then touted the news as if they bedded Ginni Rometty herself. A blog post over at IBM has Archer discussing their “plan to use IBM’s open-source Qiskit programming software stack,” not exactly the sort of collaboration one would conceive when reading last Spring’s ZDNet article headline, “Archer to work alongside IBM in progressing quantum computing.”
Pause and Reflect
Let’s break from this story for a second and reflect on what’s happened so far. This mining cum disruptive technology company has pivoted into about half a dozen products without managing to show meaningful progress in any. All these graphene products we’ve been promised are always just a memorandum of understanding away from something actually being produced and sold. Not one of these many press releases provides investors with tangible dates as to when we should expect to see some real traction.
We’ve seen hundreds of companies like this over the years and find it incomprehensible that some people – even those with a decent amount of investing acumen – will cling on to these stories hoping that success is just around the corner. Paid stock promoters fuel this hope with pumped-up pieces that parrot management’s value proposition du jour.
They’re just one of several firms that Archer uses/has used to tell their story via paid media placements. Over communicating your value proposition is bad enough, but then compensating media pundits to spread the story is a big red flag.
At this point in time, there’s little point in further examining this $250 million mining-turn-tech company that’s throwing off more red flags than a Chinese military parade.
Criticism of companies like Archer Materials will be quickly muted and disparaged by both the company and its investors. For example, some pundits pointed out that a patent status was incorrectly stated – as if the status of a single patent is something actually worth debating. Here’s one response to that scrutiny by The Sentiment:
Investors have been impressed by Archer’s efforts to “comprehensively smash that hatchet job” as one investor wrote, “certainly only increases this shareholder’s loyalty”. With overwhelming praise for the Company “dropping the mic on the useless reporter” on investor forums, the advanced materials company has developed a legion of supporters.
Credit: The Sentiment
Inevitably, this legion of supporters will start to level “you must be short the stock” accusations, or our favorite: “you’re just trying to bash the company so you can get cheaper shares.” Let’s be clear on this. We’d never remotely considered buying this bag of stories, nor would we ever consider shorting any company. As a Redditor once correctly said, “we can stay retarded longer than you can stay solvent.”
We don’t get involved in stocks like this. We simply walk the other way and dedicate our valuable time researching companies that are actually accomplishing things, and that demonstrate their traction in the form of meaningful revenues, as opposed to progress-by-press-release.
Conclusion
Even experienced investors seem drawn to stories without considering the length of time these stories get spun and the number of pivots they take along the way. Companies can keep this no-revenue show up for decades through persistent communication with shareholders, never committing to any specific dates, and paying for third parties to provide some external validation that keeps people holding the bag. Rigetti and IonQ may be extremely overvalued, but at least they’re realizing some revenues (albeit miniscule ones from IonQ so far) from whatever quantum computing devices or services they’re offering. Archer Materials is not.
Share
In its release, Archer Materials advised it has been busy developing a biochip that can analyse tiny amounts of liquid or gas such as saliva, blood, and breath.
To bring the biochip to life, the company used advanced fabrication techniques to achieve features like hair-thin microfluidic channels. These channels allow sample processing as well as transportation into smaller built-in sensors for analysing biochemical targets.
Archer highlighted the microfluidic channels are less than 20 micrometres in width (about 3 times thinner than a human hair). This gives a strong notion of the complexity of developing a biochip for the future.
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I can understand you being sceptical about Archer Materials. We will have to wait a year or two to see what they can achieve. Right now it is difficult to say how real they are.
Ah yes, the old pivot from mining to biochip manufacturing. Not buying it. We don’t invest in stories, in fact, we avoid them like the plague. Until there’s some revenues to be seen that demonstrate traction, there’s just nothing to see here. Science by press release gets really old.
Yep sure … was told the same thing by another “expert” company in stock market advice with over 25 years “experience” that novonix and Pilbara minerals were a rubbish investment and that novonix was nothing but a flash in the pan. Luckily I disregarded what was said and invested in Pilbara when they were 73 cents, but unfortunately I went with their advice and bought archer as a “good investment” and not novonix. You self proclaimed “experts” wouldn’t know if your arse was on fire!
Some quality commentary here that adds zero value to the conversation. The usual attack the messenger stuff we often see that suggests a stock is being promoted.
Yep sure, couldn’t give a rats about archer actually and as far as promoting stocks you obviously have shares in stock that’s competing with archer. Anyway, thanks for proving my point about your opinion. Oh and nanalyze this while your at it … archer materials up 30% today on the news about graphene/silicon intergration for biometrics. Bet you didn’t see that coming either. Pffft, expert … yea right!
Obviously? Maybe if you read what we publish instead of coming by with your shoot-from-the-hip accusations you’d know that what you’re accusing us of is exactly what people who are promoting a stock do. Lose the cheerleading and address the points in our piece. Or is that too much work?
Ah, so you’re someone who interprets short-term price appreciation as being relevant to the quality of the underlying company. Say no more. You can keep digging your grave mate like so many have. Or, you can move on to Reddit or some other echo chamber that reinforces your beliefs. Your call.
The only thing that’s obvious here is that – like so many before you – you came to a gunfight armed with a stick.
Thanks again for the worthless opinion … mate. If You can’t take it when your wrong what the hell are you doing offering you’re “expertise” on the internet?? Pfffft ….
It’s “you’re,” not “your.” So you’re incapable of challenging a single thing we said? Got it.
Now that you’ve made a complete fool of yourself, maybe you can move on to some other venue? Perhaps Reddit?
And now you’re blocked because you weren’t able to conversate like an adult.
As a longtime holder of AXE I am consistently disappointed by their failure to deliver anything more than promises of a future. The cautions provided here are fair and relevant to other listed entities as well. Its time for them to be gone from my portfolio AND yes there are other opportunities…some of them might be ten-baggers perhaps not but there is awhole constellation of choices which will deliver more than this hackneyed lifestyle company.
Thank you for the comment Pete! Good point. Here’s the methodology we use to analyze all stocks in the same manner: https://nanalyze.com/nanalyze-premium-articles/
There are so many great companies out there. Why should we try and chase teams with dreams?
After being concerned about Archer Materials for a while, I decided to search for more information and fortunately, I found this brilliant article, my sentiment precisely and which confirmed my intuition to dump these shares. Despite losing $20,731 (73.5%) after only two years, it was far better than losing the lot. Most of all, I will no longer waste time reading misleading announcements from Dr Mohammad Choucair (CEO) who is nothing more than a spin doctor and who sucked me in but I have learned a valuable lesson. Many thanks for your article.