Microvision is a stock with no intrinsic value and was a meme stock before there were any meme stocks. How could this be? Let’s dig into this stock a bit, shall we?
MicroVision makes, among other things, light-detection-and-ranging (lidar) technologies, and it announced on Feb. 10 that it was making progress developing a new long-range update to its tech.
The stock hit a 52-week high of $24.18 per share following the announcement, but it pulled back after the company announced a new stock offering and subsequent volatility for growth-dependent tech stocks.
A Startup with Declining Revenues
Not only has the stock been diluted, but the business is also practically without value. Again, how could this be? The company ended the year with zero product revenues in Q4 2020 and reported zero in inventory on the balance sheet throughout the entire 2020 fiscal year.
The true story is MicroVision is a startup from 1993 that has barely survived. A supposed pioneer in laser beam scanning (LBS) technology marketed under the PicoP brand name is pivoting to capture the future market demand for lidar technology. It’s pivoting because it barely makes any money and is actually in the process of failing. How so?
In the company’s Q4 2020 results, it saw revenues fall by 91% to $395,000. In the full year, revenues were down by 65% to $3.1 million from $8.9 million in 2019. On the bright side, it cut its annual operating loss by half to $13.6 million.
It’s supposed patents are worthless and now it’s trading at 790 times sales which makes it not a startup that anybody would dream of acquiring. So why does the CEO pretend the startup isn’t failing? Because he is a fraud.
MicroVision as a LiDAR company Just Isn’t Realistic
There’s no way for $MVIS to become a significant player in LiDAR, they are too small and too far behind the field. There are literally dozens of companies in LiDAR with major contracts with the current and future automobile industry leaders.
It’s actually not clear how MicroVision will survive as a startup and as a company. The stock was worth $0.17 and has now been pumped by Reddit manipulation to a sky is the limit price, currently trading at $17.35.
A meme stock spins stories that simply aren’t true to justify somehow the stock’s price increase. Imagining that its patents are worth something or that it is lined up to hook up with Apple to develop its self-driving car is worse than speculation, it’s artificial pumping of a failed startup. When you don’t make significant revenue and are losing money and haven’t made it since 1993, you are not even a real company.
Anyone can make a Reddit subreddit to pump the stock and con with crazy speculation that perhaps leads new ignorant retail traders to go along with the scam. But your debt, the SEC and lawsuits will eventually catch up with you. That isn’t magic, it’s just the reality of how the markets work.
The Sentiment of Fake Promises
MicroVision expects to be able to show a working sample of its long-range lidar solutions by April. A lot of things are supposed to happen by April. Well, April is right around the corner and you can expect this stock to tank in April.
When you look at the 5-year chart price resistance should have remained at around $1.86. That’s closer to the likely real valuation of this loser startup that nobody wants to acquire. The followers of $MVIS are just pathetic, trying to deceive each other in a monster pump and dump which makes it one of the meme stocks of 2021.
MicroVision is all that gives penny stocks their bad name. It’s the ultimate deceiver of sentiment plays in a bubble market with deceptive marketing, a fraudulent CEO and a tribe that has pumped the stock with diamond hand crypto-like behavior.
Unfortunately for them, all criminal things must come to an end. Oh, and can someone teach these poor investors how to value a stock based on their actual revenue and fundamental prospects?
The Manipulation of Hedge Funds
The real story with meme stocks is hedge funds manipulate movements in the markets with the Reddit narrative. So you may have noticed now the same publications that once pumped $MVIS are now trying to criticize it.
This means the short position on $MVIS will increase as the stock becomes more likely to have a spectacular tank. Retail investors always love a good pump and dump, they don’t mind being on the side of criminal behavior so long as they turn a profit.
But Reddit should face a probe by the SEC here, because $MVIS is the most extreme example of social media manipulation. MicroVision’s LiDAR ambitions aren’t just a pipe dream, they are an orchestrated fraud. Stocktwits also allows bulls of a stock to ban bears via (reporting) a mechanism that’s deceptive and doesn’t allow real dialogue to take place in a forum, meaning both Stocktwits and Reddit have perpetuated pump and dumps that ultimately hurt their users and customers. This eventually will of course have to be regulated.
In business terms, MicroVision’s company and technology isn’t worth $20, $10 or even $2, it’s probably worth around $0.38. When there are over a dozen such penny stocks where the internet literally lies to you, that’s when you know you are in a bubble market. With rising interest rates, we’ll likely never see price movement in penny stocks as we did in December 2020 and January 2021.
It was perhaps a once in a generation moment in the stock market where liquidity, a flood of new investors, and low interest rates created a unique environment. That artificial momentum means everything from Tesla, to Plug, to eventually the likes of $GEVO and $MVIS auto-correct.
A Robinhood Lesson in Portfolio Construction 101
Just as new Robinhood investors placed an ungodly percentage of their portfolio in Tesla, the same could be said for the followers of $MVIS. What happens to them when the stock goes down to more realistic earnings to sales ratios is not entirely clear.
They will likely learn a painful lesson about portfolio construction and diversification from a penny stock that should never have risen this much. They will ultimately come to regret their diamond hand tendencies. It isn’t so much ironic as it is sad.
At the Last Futurist we never short a stock, so when we write a piece about the fundamentals of a company we genuinely urge investors to be mindful of the risks involved. While we never give financial advice, this is in our opinion the highest probability of a stock that has been artificially inflated by around 10,700%. This means $MVIS has an 85% chance of losing nearly all of its value in the second half of 2021.
For someone that has put several thousand dollars into such a gamble, they probably deserve to lose their life savings. One of the most basic rules of investing is to never invest more than you are willing to lose.
At the Last Futurist we hate to see pump and dump schemes that could potentially mean a great deal of pain for new and young investors. We have no financial interest in $MVIS one way or the other, but ethically this is hard for us to even tolerate on Stocktwits and Reddit making a mockery of what investing is supposed to be, a fair evaluation of a business. In fact we have personally suffered a great deal in this case for being ruthlessly honest, having been a target on social media from $MVIS pumpers.
Just as there are a number of ‘zombie companies’ during the pandemic, we consider MicroVision to be a “zombie startup” that without stimulus and liquidity would have failed naturally in 2020 or 2021. This is perhaps what’s most troubling about its recent price action and why it closely resembles a meme stock, or stonk where Reddit pumping is taking place at significant levels where hedge funds play both sides to make maximum profit.
Update: two days after this post on March, 23rd, 2021, $MVIS went down 11.96%.
March 26th: The stock is down another 7% to a price of $13.06.