Rob Day: October 23, 2009, 10:16 PM

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Why the story matters

Just stumbled upon this article in Wired with the blaring headline that EEStor is worth $1.5B!

The writer starts with Zenn Motor's market cap of $169M today, points out they own 10.7% of EEStor, and that Zenn isn't going to be selling their own vehicles anymore, and VOILA! If you give zero value to the rest of Zenn Motors, divide $169M by 10.7%, thus EEStor is worth an implied $1.5B!  Amazing!

Or, you know, the market could be valuing Zenn at $169M, and that stake in EEStor at $0. Because Zenn is still going to be selling things, just not fully manufactured cars, and it's unclear when or if EEStor is going to be producing profits.

Or anything in between.  So what we can tell by the math in the article is that the buyers of ZNN.V are valuing EEStor somewhere between zero and $1.5B.

Okaaaayyyy...

Even if retail investors are truly valuing Zenn based solely upon their minority stake in a "secretive" (as in "telling everyone they can that they're secretive, while releasing a steady drumbeat of news about supposed milestones being achieved") startup, what does the vaguaries of pricing of a thinly-traded stock on the Canadian Venture Exchange really tell us?  Even proponents of efficient market theory have to admit that such prices might easily get a tad skewed by a few over-exuberant day traders...  Which I think is the point of the author, to give him his due, calling it a "questionable milestone".  Still, the headline loses that nuance.

This is after I just saw another article on EEStor (on the site Tonic, which for some reason seems to be infatuated with this one company) where the writer states "Many electrical engineers say it's not possible to make an ultracapacitor."  Uh... no.  Many electrical engineers say it's not possible to build a cost-effective ultracapacitor along the lines of what EEStor is trying to do.  But ultracapacitors are already a fairly big industry.  They're already in many products in your home.  They already exist, Tonic.

The writer of the Wired article is an EV vet who appears to be trying to poke some holes in the EEStor story.  The writer of the Tonic article is clearly infatuated with the possibilities if the EEStor story is true.  All of which is totally fair, albeit questionably edited.

But the problem is that when the headlines blare like they do, and the story about the story becomes so dominating, it really hinders the efforts of other entrepreneurs in that space.  There are numerous other ultracapacitor startup efforts out there.  Many of which hold great promise for improving the cost and performance of ultracaps so they can start to play a significant role in energy storage -- not necessarily obviating batteries, much less gasoline altogether, but in important roles nonetheless.  But many of you, gentle readers, won't have heard about those efforts.  Because of one company getting all the attention, positive and negative.  And that's not helpful.  Over-hype and controversy drives away investment, it doesn't bring it in.  It makes it more difficult for anyone in the sector, not just EEStor, to get government support or venture investment or corporate partnerships.  So we all miss out on innovations that should be commercialized, as the baby is thrown out with the bathwater.

EEStor is working hard to get their story out there, that's their right.  But I often wish reporters and editors would spend a bit more time rounding out their knowledge by talking with industry insiders before publishing breathless copy.