When an industry is budding, when its future as an industry is uncertain, scams are a big part of the equation. Penny stocks, backed by pump-and-dump artists, rope in dreamers on one side promising capital, and investors on the other side who want quick returns. They hype the ideas and then dump their shares, staying one step ahead of the law because it doesn't seem to operate in Vancouver, where most of these folks live. (Here's an article claiming up to 60% of their listed companies are real.)
Not all penny stocks are dross. Some turn into gold. Usually it's after several bankruptcies and reorganizations. Someone with brains picks up the company, or the pieces of it with value, and makes something of it. Usually privately.
This stage of the game is always dominated by venture capitalists, and for good reason. They can take the whole deal, they provide advice and management stability. They can attract more capital as it's needed, make sure everything is on the up-and-up.
Point is, though, we don't need to play that game any more with renewable energy. We've reached the “big boy” stage. That's where the value can be seen down the road, the point at which large companies start to play. Companies like GE, and Berkshire-Hathaway. This isn't the same as saying solar energy is now the cheap energy, but crossover is over the horizon, and smart money wants to be there.
This is also a good entry point for venture capital. There are a growing number of green funds looking at good deals. Some deals are getting their second or third injections of funding. Others are still fishing for their first.
Yet this is also the stage of the game when the gullible can be trapped by the greedy.
Mantra Energy seems like it's on to a big, new idea. Treat carbon dioxide not as a pollutant, but as a feedstock. Use electricity to turn into valuable chemicals and gases you can burn. If you can recycle carbon dioxide rather than try to hide or “sequester” it you can treat the causes of global warming as a financial opportunity.
It's a lovely dream. But don't put any dreams, lovely or otherwise, in the hands of a guy like Larry Kristof. Kristof has been playing this penny stock game for some time, 15 years according to his biography on the Mantra Energy site. He brags about having run an oil-and-gas servicing firm called Lexington Energy. Now THAT's a penny stock.
Who else you got?
How about the aptly-named Elden Schorn, last seen earning $57,000 (plus stock options with inflated valuations) to run Global Green Solutions, another start-up that also claimed to be working to reduce greenhouse gas emissions and increase energy security. Want to guess what happened to them? Suspended reporting to the SEC in October.
Just because these two guys have been losing in penny stocks for years doesn't mean they haven't found something great this time. But we're talking long odds.
Or how about Norman Chow of Kometco Research. They were formerly the industrial process division of BC Research, associated with the University of British Columbia, which closed in 2007. It's now a contract engineering firm. You got something to test, to prove? They'll prove anything.
UBC, by the way, was formerly the professional home of Colin Oloman, where he's now professional emeritus. Oloman made most of his career at the school's pulp and paper center. He's the group's big boffin, its scientific man, the guy who scored the big “breakthrough.”
And it's his “breakthrough” on which Mantra is banking. It's a patent for a process, using electricity to turn carbon dioxide into useful industrial products.
Now, Oloman claims this is practical, but at what price? How much will it cost to wrangle the carbon dioxide into the system? At what concentrations does it become viable? And how much electricity are we talking about? Are the value of the outputs greater than the cost of the inputs?
So what we have here are some experienced penny stock guys and a retired college professor who claims he can turn carbon dioxide into something useful.
If a serious venture capitalist thought this thing had a snowball's chance in hell they would be all over it.
Don't you touch it with a barge pole.