American Superconductor (NASDAQ: AMSC) is up 121% premarket on the back of what we think is a bit of nominative indeterminism. That is, people are diving in because of the name and the fuss about superconductors. But the truth is that AMSC has no interest in - it doesn’t own any of - this new superconductor if it does exist. Quite the opposite in fact, if the new room temperature superconductor does exist then this will do significant damage to American Superconductor’s line of business. As it will to pretty much every extant operator in the electricity distribution business.
The background here is excitement over a new scientific claim. And we really do need to call it a claim at this point, not a fact: “LK-99, a lead-based compound, is purportedly a room-temperature, ambient-pressure superconductor. Such a material, which conducts electricity without any resistance under normal conditions, could have huge implications for energy generation and transmission, transport, computing and other areas of technology. The papers have sparked wild enthusiasm online, and several efforts to replicate the work. At the same time, there are reports of disputes among the Korean researchers over whether the research should have been released at all.”
Ahh, but it has been released. And there are labs all over the world scurrying to check the claim. For one of the things the Koreans did do is release everything necessary to replicate their claim. It might take another week or so for us all to be sure. Either it works or it doesn’t and we’ll find out. If it does work then yes, this is entirely revolutionary. It will entirely change the way national electricity grids work, for example. Speed, mightily, the adoption of renewables. There will be vast sums of money made out of it too.
American superconductor share price from Google Finance
There will also be vast sums of money lost by others. For that’s the way a new technology works. Those using the old ways now being replaced lose out - obviously enough.
But here’s what we think is happening with American Superconductor stock. Word is leaking out (much of the discussion so far has been on Twitter) of LK 99. Our own view is that we’d be surprised as Hell if a lead copper compound had these room temperature superconductor characteristics. But we’re willing to wait to find out. But as word leaks out of a world changing - possibly - technology people start to look about how to make money out of it. And, well, look, there’s a company with “superconductor” in the name. This’ll work, right?
And for as long as people are investing in AMSC purely on that coincidence of the name then yes, it’ll work. And as soon as people realise that AMSC has nothing at all to do with this new technology then it’ll stop working.
We really do think this AMSC stock price rise is just a confusion about the name of the company. Willing to be proven wrong but that’s where we are right now.
