Nano Nuclear Energy Is A Stock Market Pipe Dream
Video: A review of Nano Nuclear Energy's fundamentals.
Transcript
Nano Nuclear Energy (NNE) is a company developing nuclear micro reactors, with a market cap of around $570 million
Microreactors are even smaller than the small modular reactors that have been getting a lot of coverage in the media recently. They’re small enough to be transported by truck.
In this video, we’ll discuss Nano Nuclear’s fundamentals, and why I think the company is a stock that’s likely designed to be a quick cash grab to enrich insiders, more than anything else.
This company reminds me of Nikola in several ways back in 2020, but nuclear is an even more challenging industry than the automotive business. As you might recall, the founder of Nikola, Trevor Milton, was sentenced to four years in prison for securities fraud. He actively defrauded investors by alleging they had developed functional EV and hydrogen prototypes, while it was all vaporware. None of the promises he was making were true.
As things currently stand, I don’t think NNE will to be able to deliver anything tangible for investors any time soon… and even if they do, their timelines are far too long for them to justify being a public company.
(To be clear, I don’t think NNE is an outright fraud, but I think they will struggle to deliver anything tangible)
Nano is hoping to commercialize its reactor technology in 2030 to 2031. A six or seven year wait to generate revenues from their core business is a ridiculous timeline for a public company dependent on share dilution. But we’ll talk about that some more later in the video.
On the surface, management has assembled a team of PhDs and master’s degrees in nuclear engineering or scientific fields.
Which is exactly what we would want to see in a company developing nuclear technology, of course, but the problem is that none of them are full-time employees right now. Everyone working at this company is an independent contractor working on other ventures, besides the Founder and President Jay Yu, who seemingly just became their first full-time employee.
Additionally, while much of the nuclear technical and regulatory executives seem qualified… strangely, Jay Yu and the board of directors have no experience in engineering or the nuclear industry.
Jay is the President and Chairman of St James Gold Corp and a board member of Flewber Global, which is a flight sharing company for private jet charters. At no point has he had any relevant experience.
As for the board of directors…
One is an orthopedic physician, one is a pharmacist who might or might not be related to Jay Yu since they share the same last name… although I’m not sure if they’re related or not, and the third one is a business consultant. No one on the board besides the CEO has any relevant experience.
Several short reports on Nano Nuclear have noted that Jay Yu and James Walker have both been executives and board members in several failing mining companies… but mining companies fail all the time. Failing and under delivering is what the mining industry does best.
So, that doesn’t really mean much to me. Although, it might be a sign that they’re not going to look out for the best interest of shareholders, since that is a common occurrence in the mining space. The fact they’re not full-time employees is definitely a concern though. Developing novel nuclear technology isn’t something you can really do with multiple other ventures on the side.
But yeah, the lack of experience at the higher levels of this company makes me question what’s going on here. On top of the fact that there’s nearly zero employees putting in full-time work hours into a very complicated business.
The company is developing two different reactors, the Zeus solid core battery reactor, and the Odin low pressure coolant reactor.
Microreactors theoretically have a variety of benefits, including:
Designs that increase safety because they’re configured to avoid melt down scenarios like the ones nuclear has dealt with in the past.
Portability to fit into a single standard shipping container.
Mobility allows them to provide power in remote or unconventional areas.
It would be great if the company can manage to do this, but this will certainly be an uphill battle. Nano is also trying to develop a nearly completely vertically integrated nuclear company, from fuel fabrication, transportation, to the reactors themselves, and consulting services for the industry at large.
Nano has made some progress on putting necessary partnerships in place with Battelle Energy Alliance for a license on a high-assay, low-enriched uranium (or HALEU) system to transport reactor fuel. This is in addition to a memorandum of understanding with Centrus Energy to supply the fuel Nano would need for its reactors. But it’s clear that Nano is in the very early stages of developing anything tangible.
Nano hopes to build functional prototypes of their reactor designs by 2026. After which they hope to complete regulatory licensing for these designs by 2030 or 2031. Manufacturing would be done during the licensing phase so the microreactors could be deployed upon approval.
A former chair of the US Nuclear Regulatory Commission, Allison Macfarlane, told Hunterbrook that Nano’s timelines were essentially laughable as licensing alone would probably take several years longer than the company predicts. Additionally, as of July 17th, the NRC had reported that Nano Nuclear hadn’t even started the licensing process.
For reference, BWX Technologies and Westinghouse, who are two of the established players in the North American nuclear industry… plan to commercialize their microreactor designs by the early 2030s and the mid-to-late 2020s respectively. So, the idea that Nano is going to achieve a similar feat on a similar timeline is unlikely.
Nano has filed a provisional patent for the Zeus reactor, which is only in place to protect key design considerations and establish a filing date. In addition to that, they filed another provisional patent for their recently acquired Annular Linear Induction Pump technology.
But the company hasn’t formally filed any patents. They say this is to maintain their technology as a trade secret. Which could be true… it could not.
The other reason to be skeptical that they’ve made any substantial technological progress is that the company has essentially spent nothing on R&D so far.
As of June 30th, Nano had spent just $2 million on R&D in the second quarter of 2024. Meanwhile other companies have spent hundreds of millions, if not billions of dollars designing these types of projects.
So, it’s hard to see Nano lasting long enough in public markets to reach a commercial scale when the company is seemingly just getting started.
Yesterday, NNE’s stock fell 7% because the company announced a $36 million offering, diluting around 2 million shares and another additional 1 million warrants. It’s worth noting that the warrants are immediately exercisable at $17 per share. So, we could see additional dilution from this deal immediately.
This is what I’m talking about. This deal is just a taste of the dilution this company will have to go through to reach commercial viability, if they ever do.
And speaking of additional shares… the shares involved in the initial IPO will be out of lock-up in November. If insiders were to sell those shares, that could apply some downward pressure on the stock. Leak out holders, which were existing Nano shareholders before the IPO, every 30 days they can sell extra portions of their stock positions.
This stock is largely driven by hype right now, not fundamentals… so additional shares hitting the market could be bad news for investors getting in now.
Again, this will be this stock’s story for the next six or seven years… if not longer.
If you’re investing in the stock as a short-term trade, that’s one thing… but I don’t think a long-term investment makes any sense given where the company is at. With that said, as always, your investment decisions are yours to make, and I’m certainly not giving out investment advice.