Graphene Investment Opportunities: Buyers Beware
With graphene plastered all over the headlines, understanding that products made from graphene are few and far between may elude many investors
You could feel it building last summer. The investment community had seen and heard a regular barrage of headlines over the years touting graphene and they were bursting at the seams to find out how investors could make some money from the so-called “Wonder Material.”
It hardly mattered that of the nearly forty “graphene companies” that existed at the time last year none were publicly traded companies. Despite this, venerable stock-pick mags like Forbes started running pieces on how to make graphene investments through the stock market (“Graphene Stock Investing: What The Pros Think”).
One stock guru explained in the Forbes piece that some good graphene investments would be in companies like Enersys, Tesla Motors, and Johnson Controls without giving any explanation of why these companies constitute good graphene investments. One could imagine that the analyst believed that graphene would someday (maybe five years from now) be finding its way into some energy storage technology that Enersys would sell to companies like Tesla to power their vehicles. That’s a connection, but it’s a far cry from figuring that graphene was really going to benefit these companies to such an extent that you should invest in them as a “graphene play.”
For the most part, these kinds of stock market indices for nanomaterials are harmless. They mainly serve to occupy our mind in making increasingly more obscure connections between a nanomaterial and the companies that might benefit from them. At the end of the day, if you invest in a blue-chip stock because you think it will benefit from some nanomaterial, you still have the blue chip stock no matter what the fortune’s of the nanomaterial end up being. But then something more worrisome started to occur.
Late last year the UK Financial Conduct Authority (FCA) warned investors to beware of scams involving graphene. The FCA based its warning on evidence it had retrieved from a computer belonging to a suspected ‘boiler room’ company that made reference to a graphene investment company.
The FCA’s suspicions were heightened about the graphene investment company when they recognized that the same firms that had sold other high risk, dubious products such as carbon credits, rare earth metals and overseas land and crops, were now trying to sell graphene.
The FCA announcement when on to say that “If it sounds to good to be true, it probably is.” And recommended that if you want to make investments in graphene, you should do it by purchasing products from companies that are authorized by it. Their register can be found here. The FCA never has publicly identified the companies it suspects of running graphene investment scams.
“The scam we are highlighting today relies on the fact that although many people will have heard of graphene they may be unaware it will be some time before graphene-based products hit the market,” said Tracey McDermott, director of enforcement and financial crime at the FCA, in an interview with the UK paper The Telegraph. “What’s more, finding an accurate price for graphene is very difficult, and its value is expected to fall over the coming years.”
The price of graphene and whether its price will rise or fall is a graphene investment mechanism that has been offered by at least one UK-based company, Viscount Resources.
Another UK-based company, Graphene Trade, markets itself on its website as “a new market focused broker of future commodities offering a window into speculation.” Based on its name and its marketing copy, the company would seem to offer a commodity investment in graphene. However, when we attempted to confirm this and find out more about what investment instruments Graphene Trade offers its clients for this piece, we were rebuffed both over the phone and via e-mail. Stephen Coles, Director of Graphene Trade, explained to us over the phone that he objected to a piece this editor had published in the online version of IEEE Spectrum, which would prevent him from doing an interview with us for this piece.
While we don’t know what Graphene Trade offers its investors, we do have investment literature and a previous interview with a representative of Viscount Resources that makes clear that this company last year made it possible for you to buy graphene at the current market price, warehouse it in a facility (Viscount offered a three-year warehousing) until which time the price of that particular type of graphene goes up and you can sell it for the new higher price making a profit. It’s not clear Viscount still offers this investment opportunity since the term “graphene” has almost disappeared from its website, except for mentions its industry news items from November.
Anyone familiar with commodity investment understands that this is a supply-and-demand commodity investment. You buy a mined mineral, like gold or diamonds, expecting for demand to go up that will put a strain on supply and cause prices to go up. However, there is one problem with treating graphene as a commodity investment: It’s not a mined mineral; it’s manufactured.
Since graphene is manufactured (it is primarily produced using the raw material graphite, but not always) a producer can just make more of it, if demand increases significantly.
Lux Research has estimated that 60 tons of graphene were sold last year. That was with graphene producers operating at 25-percent utilization rate. That means that if suddenly there was demand for 240 tons of graphene this year, graphene producers wouldn’t have to do anything but use their equipment 100 percent of the time.
Further, if graphene demand were to suddenly jump up to 2400 tons, it wouldn’t take much more than getting a bigger vat and more solvent to ramp up production almost over night, according to producers.
Currently, we’re not in that position since the bulk of graphene-based products won’t be with us until 2020, according to many experts. So, with demand not expected to increase for another six years, producers currently over supplied, how is the price of graphene going to go up in the next three years?
That’s not clear.
What is even more alarming for this kind of investment is that every graphene producer is aiming to bring down the price of graphene significantly in the hopes that this will actually open up applications for the material. The market can’t “take off” as investment gurus like to say until you can bring the price of graphene down. That doesn’t bode well for an investment scheme that links the market for graphene taking off to a steep rise in the material’s price.