BeammWave (BEAMMW B): Unlocking the full potential of 5G

Summary:
Okay, so this post might be a little bit different from what you’re used to around here. But if you bear with me, I believe you’ll find it interesting. BeammWave (BEAMMW B) is a Swedish deep tech company led by the people behind the success of Bluetooth (yes, that Bluetooth), and they have developed the next generation technology for wireless communications. Their current market cap is about 150M SEK (5 SEK/share), but the potential market is in the billions of USD. Several of the biggest telecom companies in the world are currently evaluating their technology, aiming to implement it in future products (estimated 2025/2026). Such a revenue-generating implementation would be a major catalyst for the share price. However, operating in a very hot field, their substantive patent portfolio alone is likely worth significantly more than the current company valuation, drastically reducing the risk. 

 My investment strategy:

I consider myself a value investor, at least in the sense that I search for companies that are overlooked—and undervalued—by the market. Specifically, I spend a lot of time analyzing small, international companies, and I prefer to focus on those in the technology sector. Why? Because oftentimes, groundbreaking innovation comes not from the giant behemoths with thousands of employees and near limitless funding. Instead, it comes from small groups of talented people with great ideas and no bureaucracy to limit them. These small, early-stage companies often have quite unattractive finance sheets, so just looking at the bottom line won’t tell you much. Instead, I focus on three main points:

  1. The people: An investment in a company is really an investment in the people running it. You can have the most promising technological solution and all the money in the world, but if the people in charge lack the skillsets, connections and passion to utilize it, it’s never going to take off. 
  2. The product: Is there a need for it? Does it solve a problem? What is the market for it? What is the competition? You know the drill.
  3. The valuation (and the financials): What has been priced in? Does the valuation make any sense? Also, I know I said the financials in these companies are often an eye-sore, but there are different levels of hell. Is there an imminent risk for bankruptcy or new share issues? How much do they spend a year? How long will it realistically be until they start making money?

It may sound obvious, but I really stick to these points. If one of them doesn’t hold up, I don’t invest. To quote Munger: 

"And the wise ones bet heavily when the world offers them that opportunity. They bet big when they have the odds. And the rest of the time, they don't. It's just that simple." 

Meaning, I turn down the vast majority of the companies I analyze. But once in a while—when I find what I believe to be a truly undervalued company—I bet heavily on them. With BeammWave, this is one of those times, and I would love to hear your thoughts on it:

BeammWave’s people: 

The company is founded—and still run by—engineers. There is not one professional finance-bro-hustler within sight, only these old grandpas (literally) with more than a century of combined experience working at the biggest telecom companies in the world. For example:

· CEO: Stefan Svedberg, an electrical engineer who at Ericsson had a driving role in the development and global success of Bluetooth. Was also responsible for several M&As.

· VP of Business and Sales: Robert Cadman, who was in part responsible for bringing the Bluetooth technology to the markets. 

· Chief Systems Architect: Bengt Lindoff, one of the world’s most prolific inventors with 2000+ patents in his name, who most recently had a top position at Huawei (developing 5G systems).

· Chairman of the board: Fredrik Rosenqvist, a civil engineer and the ex-CEO of Saab Ventures, who amongst other things facilitated the sale of C3 to Apple.

I could go on, but you get the drill. Together, they not only carry an enormous respect within the industry—with far-reaching connections to the people at the very top of the big companies—but also an incredible know-how in just what it takes to successfully launch a new, revenue-generating technology. Also, they clearly have a lot of faith in—and passion for—BeammWave. If not, why would they all leave their cushy jobs at these giant companies to spend all their time and effort (and personal money) on this small start-up?

BeammWave’s product: 

Wait, why did they actually leave their top jobs and go work for a start-up? Well, it’s because BeammWave has achieved something no one else has done before: distributed digital beamforming (DDBF) at millimeter-wave frequencies.

So, what’s that? 

In short, it’s an objectively superior way to build the mmWave wireless communication systems of the future (meaning 5G, 6G and all the other Gs to come), providing much better data speed, capacity, signal strength and power consumption than what is currently used (i.e., analog beamforming). In addition, their DDBF solution also solves several of the critical problems facing the industry today, including frequency capacity saturation, the infamous mmWave Non-line-of-sight (NLos) sensitivity and more.

Companies like Verizon, Qualcomm and Apple has poured BILLIONS of dollars into mmWave technology, but so far it really doesn’t work very well. I won’t get into the details of the technology here, but if you find this post intriguing, I would highly recommend you to read up on it before investing. I believe it’s going to be difficult to really grasp the potential value of BeammWave (and how one small start-up could achieve what the market leaders couldn’t) if you don’t understand the technology at least at a basic level. Just know that literally everyone in the field agree that digital beamforming is far superior to the analog version used today. The problem has been that DBF has historically been more complex (ill-fitted for mass production), uses more power and costs more money. With BeammWave's solution, it is actually both cheaper, uses less power and is designed for mass volume production, while still delivering far higher data speeds etc. than the analog versions.

So why aren't other companies interest in their technology? Well, who said they weren't? BeammWave currently has 3 customers: Molex (a big electronics supplier for a lot of companies, including Apple), Alpha Networks (a Taiwanese electronics company) and an anonymous Asian market leader likely to be Murata (also an Apple supplier). These companies have already purchased BeammWave's development platform ADP1 and are currently building their own prototype products with it. Furthermore, BeammWave has a number of other partners, including Saab and Ericsson, while also having signed NDAs with other companies (think Samsung and Qualcomm) and are having ongoing discussions with a large number of companies (including "the biggest companies you can imagine", a CEO direct quote). As a testament to this, they have been given access to one of the biggest foundries in the world (in Germany) to produce their prototype chips (and assisting BeammWave with material/production). This is practically unheard of for a company of this size.

So, what does BeammWave actually do? Their actual product is an extremely advanced, 3x3mm radio-frequency integrated circuit (RFIC), coupled with software. It is optimized for high-volume production, with the goal to replace the currently used antennas/RFICs in not only smartphones, but in radar systems and satellites, drones, IoT devices, automotives, and FWA systems. They are likely to be earning 1-2 USD/chip, and a typical smartphone would carry 6-10 chips. Given that there are more than 1 billion smartphones produced annually (and that the handset market is just ONE of BeammWave’s markets), it actually becomes quite ridiculous when you start to crunch the numbers. We’re talking tens of billions of dollars if they manage to get even, let’s say, 15% of their TAM, and that is not considering how the mmWave market is expected to have a CAGR of 15-40% until 2030. Importantly, their technology is compatible with the current infrastructure, meaning that it's not necessary to replace current basestations etc. in order for it to work.

What about the competition? Well, right now, there isn’t actually any competition. BeammWave is literally the first company in the world to succeed in doing this. This is of course likely to change, but considering the "minefield of patents" (a literal quote from the CEO) that they have put down around the concept of DDBF, and their intention to "own the entire field" (another literal quote), it will likely be very difficult for other players to develop similar solutions without having to pay licensing fees to BeammWave. Remember, it's not really a question if digital beamforming will replace the analog technology: it's a question of who will do it. And right now, however unlikely it may seem, BeammWave appears to be winning the race.

So far, the people and the product are all green in my book. What about the valuation (and the financials)? 

BeammWave’s valuation (and financials):

At the IPO in 2022, the valuation was around 200M SEK, which at the time was considered modest. Now, more than two years, 40 patent applications, a few giant customers and even more collaborations later, the valuation is...150M SEK (5 SEK/share) This is somewhat equal to what they have spent on the R&D, meaning that you get 10+ years of research from some of the best engineers in the field basically free of charge. Furthermore, they have practically zero debt. Analysts estimate the fair value right now (without any further deals) to be 7-12 SEK.

They just completed a warrants issue, and coupled with grants and sales of their ADP1 platform in Q4, they should have about 50M SEK in cash at hand right now, with the annual burn rate of 2023 being around 29M SEK. Thus, they should be liquid enough to get through at least 1 full year without any additional revenue. However, they have made clear that they expect several more customers short-term, and their stated plan is to have revenue-generation products hitting the market in 2025-2026. So far, they have never made any attempt at unwarranted hype-building, or promised things they couldn't keep, so I have no clear reason to doubt their words on this.

So what's the catch?
I guess now would be a good time to ask what the problem is. The thing is, I don't know. There has so far been no failures, no broken promises, no deals that have fallen through or actually any signs of industry lack-of-interest. I genuinely don't understand the valuation, and would appreciate feedback on this, but I have two hypotheses:

  1. BeammWave is listed on a small, Nordic market (Nasdaq First North) with very little influx of international investors.
  2. The technology is incredibly complex and not very sexy. No one gets excited about radios, antennas, frequencies and complex telecom terminology. And, since the company is headed by engineers, they have had trouble presenting the company in a way that investors understand. Simply put, people don’t understand what the hell they are doing, and subsequently also fail to grasp the enormous potential of their technology. 

Furthermore, there are several obvious risks associated with investing in a company of this size (and in this industry). Here are the main Challenges & Risks as listed in their 2023 annual report:

  1. High-Competition Market:
    • Operating in a field with resource-rich global competitors, where patent disputes are common.
    • Risk of design issues in their advanced semiconductor products, which could lead to costly rework or delayed launches.
  2. Operational Sustainability:
    • Dependent on successful execution of product commercialization and effective utilization of raised capital.

Fair points. However, I think the management has done basically everything they can to reduce those risks as much as possible:

  1. Patent disputes: They are talking with pretty much everyone in the field (and have been for years), having either signed deals/partnerships or NDAs with most. I believe this extensive networking and deep-reaching connections is a significant hedge against patent infringement, especially compared to start-ups run by less-experienced/connected people. 
  2. Product commercialization:  The prospect of a successful commercialization is greatly helped by the early access to a world-class foundry, in addition to letting customers use ADP1 to build their own prototypes using BeammWave's technology. This way, it's up to the customers to make it work, with BeammWave adopting a supporting role. Also, considering the steady influx of new customers/partners/projects, I think it's quite unlikely that the technology doesn't work. There would be signs by now (cancelled deals/aborted projects etc.). It’s also important to add that For BeammWave, mass-volume-production was the number 1 criteria from the very beginning, and considering the experience they have (and the amount of testing they have done), I find it unlikely to discover any major flaws in the product. At least when compared to your average, run-of-the-mill tech start-up.

With this said, I would love your feedback on this, and any criticism is highly appreciated. This post got really long, despite me trying to keep it relatively short. For example, I haven't event touched on the prospects of an acquisition, which I personally believe is probably the most likely case (by Apple, Qualcomm or some other giant player).

Cheers!

Disclaimer:
I own about 32k shares of BeammWave and I intend to hold these for at least 2 years, or until acquisition. This is not a P&D (but I guess that is what at smart P&D:er would say), but a long-term holding with the potential to generate extreme profits. I’m not posting this analysis to pump the share price—any upcoming deal will be enough of a catalyst—but frankly because I’m frustrated that a company with this potential is practically unknown outside of the industry, and I thought you might find it interesting.