Aqua Metals Inc (NASDAQ: AQMS)
As self-proclaimed smart investors, we should always be looking between the cracks to find the stocks that are either revolutionary, innovative, or so disruptive to an industry that it causes a technological or systematic shift from the way things get done. Apple changed the way we communicate, Amazon changed the way consumers shop, and Google changed the way people use the internet to find information about millions of topics within a second of pressing a button on a keypad. But, there is always room for more disruptions.
Here’s the new kid on the block, Aqua Metals, Inc., a company that may be on the verge of joining this list of disruptive elite to become the first and only company that has the technological capacity to reinvent the lead-acid recycling industry. As far as AQMS is concerned, smelting, the environmentally poisonous method of recycling lead from used and discarded batteries, should be a thing of the past. With the patent pending AquaRefining method, not only is the AQMS method a technological breakthrough, it is one that can be quickly endorsed and sponsored by both lawmakers and environmentalists alike. Even legislators supported by the fat wallet lobbyists will have a hard time explaining why they don’t support the AQMS method of extracting lead-acids over existing and now antiquated methods.
AquaRefining Uses Water!
The technology is uber-advanced, and without a doubt, may be hard to comprehend at first glance. How’s this for innovation – AQMS technology uses room-temperature water to extract and recycle lead-acid from batteries. Vastly different from smelting, the patent-pending AquaRefining technology is a room-temperature, water-based process that is fundamentally non-polluting. Also, and because of this non-firing method, the AQMS modular systems not only allow the extraction of lead-acid compounds, but simultaneously improve environmental impact and provide the ability to scale production to meet rapidly growing demand for lead-acid based products.
Building the first AquaRefining facility in Nevada’s Tahoe Reno Industrial Complex, the AQMS focus is to reduce the refining inefficiency, costs, and toxic waste associated with conventional smelter-based recycling of lead-acid batteries. AQMS technology not only delivers a breakthrough process, but it also produces a better product at a higher yield, and it eliminates toxic waste. Of additional value is that the process significantly reduces the permitting process and building a new AquaRefining facility requires a substantially smaller capital expenditure over the construction of smelting facilities.
The stock is now trading at $18.15 a share, up from approximately $13.00 at the start of the year. While the stock has been reacting extremely well during the past several months, AQMS is still somewhat under the radar as far as retail investors are concerned. However, that is not to say that the recycling industry is not recognizing the potential for this company to grow exponentially over the next decade, as well as being able to provide significant and beneficial environmental impact from their processes.
AQMS received prestigious recognition from ICIC Innovation Awards in 2016, was the winner of the Sustainable Technology Award at the IChem Global Awards in 2016, and is a 2016 Platts Global Award Winner in 2016. Apparently, AQMS is not some alchemist’s dream of turning sand into gold. To the contrary, AQMS has already proven their technology, is advancing their strategy, and has already become a revenue-producing company.
Bolstering confidence, in February of 2017, the company signed a breakthrough agreement with Johnson Controls (JCI), which provided a tremendous first step forward in working with global leaders in the responsible recycling of automotive batteries. Under the terms of the agreement, Johnson Controls will become the first licensee for AquaRefining technology. In doing so, JCI will supply AQMS with batteries to recycle as a service, and AQMS will be part of a closed-loop cycle with Johnson Controls. Additionally, Johnson Controls will purchase AquaRefined metals produced by AQMS and has also agreed to buy just under 5% of AQMS outstanding shares of common stock.
Furthermore, Interstate Batteries, an industry giant, has also taken a substantial interest in the company, purchasing a stake in AQMS as well. Under the terms of the agreements made in 2016, Interstate Batteries has agreed to supply more than a million automotive and other lead-acid batteries as feedstock for Aqua Metals’ AquaRefineries. Interstate Batteries will also make a strategic investment of approximately $10 million into Aqua Metals. This strategic investment into Aqua Metals will be in the form of common stock, a fixed-price note that converts into common stock, and two cash warrants to purchase common stock over the next three years. It should be pointed out that, as part of a diversification strategy, Interstate Batteries recently adopted a Rule 10b5-1 trading plan to reduce their ownership stake in AQMS by 430,000 shares, with proposed sales offered at their discretion.
Getting The Lead Out
Industry disruption is good. And, for investors seeking ground floor breakthrough opportunity, AQMS may offer the closest thing to newly-discovered alien technology on the planet. And, while I am an Area 51 enthusiast, making the comparison to otherworldly technology is not so off-the-wall. AQMS is on the verge of replacing decades worth of old technology, substantially reducing toxic waste and environmental damage, and replacing a process that is significantly more costly than what AQMS can deliver in a simpler fashion. And, AQMS is doing this by using room-temperature water, a process that should soon make it into “Ripley’s Believe it Or Not!” Hall of Fame.
Investors should also appreciate the stakes taken by both JCI and Interstate, which may ultimately lead to additional support for the stock moving forward. Although Interstate is divesting some of their stakes for diversification purposes, JCI has not demonstrated the same willingness to let go of their stake.
In simplest terms, being disruptive prevents a company from being disrupted. If AQMS was nothing more than a stock that was in the brainstorming and proof-of-concept phase, investor caution might be more warranted. However, that’s not the case.
AQMS has the processes and facility in place, is producing revenue, and their technology is being embraced globally. In that sense, if investors decide to get the lead out and invest at current share price levels, that decision appears to be well supported by industry experts and environmental watchdogs – two factions that have the ability to promote a peaceful transfer of power in the industry. In that respect, AQMS’s methods of extraction may be both well received and endorsed, providing continued momentum for the company going forward.
Disclosure: I have no shares in any stock mentioned in this article and no plans to open any positions over the next 72 hours.
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