Coates International Ltd (OTCMKTS:COTE) is a deep sub-penny stock that burst onto the scene on Wednesday in a big way, powering 600% higher in one trading session in response to a headline that takes us to the very heights of potential speculative trading. The company apparently received “official notification from Secure Supplies Mexico LLC that the solar system project in Mexico is budgeted for $412,000,000 USD over a three year period.”
According to the release, the Company will deliver 40 to 50 CSRV large industrial electric power generators to operate on gaseous hydrogen produced on site. According to the press release headline, “Revenues From This Transaction to the Company Will be Approximately $40,000,000 USD”. That said, the release also contained a qualifying disclaimer: “There can be no assurance that the Company will be successful in any of its endeavors.”
The market usually does a decent job of pricing risk, including risk of success. To have a stock trading under a half of a hundredth of a penny per share when there was a risk of this type of windfall would be highly unusual. It’s not impossible, but some healthy skepticism is always encouraged with this type of sudden revelation.
Coates International Ltd (OTCMKTS:COTE) trumpets itself as a company that has been developing over a period of more than 20 years a patented Coates Spherical Rotary Valve (CSRV) system technology which is adaptable for use in piston-driven internal combustion engines of many types.
According to company materials, “Independent testing of various engines in which we incorporated our CSRV system technology (\”CSRV Engines\”) confirmed meaningful fuel savings when compared with internal combustion engines based on the conventional \”poppet valve\” assembly prevalent in most internal combustion engines throughout the world. In addition, our CSRV Engines produced only ultra-low levels of harmful emissions while in operation. Engines operating on the CSRV system technology can be powered by a wide selection of fuels. We believe that these three major advantages of the CSRV system technology constitute the first revolutionary technological advancement of the internal combustion engine suitable for large scale production since its introduction more than one hundred years ago.”
“The CSRV system is designed to replace the intake and exhaust conventional “poppet valves” currently used in almost all piston-driven stationary, automotive, motorcycle, and marine engines. Unlike conventional valves which protrude into the engine combustion chamber, the Coates rotary valve system utilizes spherical valves that rotate in a cavity formed between a two-piece cylinder head. The Coates’ rotary valve system uses approximately 1/10th the moving parts of conventional poppet valve assemblies. As a result of these design improvements, management believes that the engines incorporating the Coates’ rotary valve system (Coates engines) will last significantly longer and will require less lubrication over the life of the engine, as compared to conventional engines. In addition, Coates’ rotary valves can be designed with a larger opening into the engine cylinder than conventional valves so that more fuel and air can be inducted into and expelled from the cylinder in a shorter period of time. Larger valve openings permit higher revolutions-per-minute (RPM’s) and permit higher compression ratios with lower combustion chamber temperatures, allowing the Coates engine to produce more power than equivalent conventional engines. The CSRV engine is a highly thermal-efficient power unit. We have been granted an exclusive license to this technology from our founder, George J. Coates and his son, Gregory Coates (the \”Coates License Agreement\”), in the Territory defined to include North America, Central America and South America (the “Americas”).”
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Company President and CEO, Mr. George J. Coates, comments: “This is only one of the projects that our Company is involved in with Secure Supplies. These projects work in the following way: Secure Supplies set out on the site where hundreds of solar panels are erected producing electric power and producing hydrogen, which is stored in special expansion tanks. When the sun goes down, the Coates CSRV electric power generators fire up operating on the stored hydrogen, which is produced by the sun. These CSRV generators are synchronous and only produce the power required at any given time up to 50 M.W. These are the most “green” projects ever. These projects are many worldwide. Coates CSRV engines are the only engine suitable to operate on gaseous hydrogen continuously.
“Management believes this is a turning point for the Company that will benefit all involved.”
As noted above, this is an extraordinarily speculative play. But that does not mean the stock won’t run further if the company can provide any further substantiation of the viability of this project. Everything here comes down to whether or not the company will actually receive revenues from this deal.
Traders will note 600% gained just on Wednesday. Nothing else is really relevant to analysis here on a technical basis.
Now commanding a market cap of $11.5M, COTE has virtually no cash on the books, which compares with about $1.6M in total current liabilities. COTE is pulling in trailing 12-month revenues of $94K. However, the company is seeing declines on the top line on a quarterly y/y basis, with revenues falling at 0%. You can bet we will update this one again as new information comes into view. For continuing coverage on shares of $COTE stock, as well as our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!