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Synthesis Energy Is All Talk And No Walk - The Technology Is Still Inefficient

White Diamond Research profile picture
White Diamond Research


  • With energy prices low, Synthesis Energy's syngas technology is even more uneconomical than it was when energy prices were high.
  • The company hasn’t had a profitable quarter in over 7 years.
  • Synthesis Energy has a shady past with deals that never go through, and that won't change despite management's big talk.
  • Even though its production is idled, the company is putting out PRs saying it will take on more projects in order to excite retail investors.

Synthesis Energy Systems (NASDAQ:SYMX) is a "green energy" company that has never made a quarterly profit in over seven years. Last quarter, it laughably only made $1.3 million in revenues. Yet, management continually talks a big game to keep bringing in new investors to buy the stock so it doesn't get delisted from the Nasdaq. We at White Diamond Research advise investors to judge the company by its revenues, NOT by what management says or by "China deals" that usually don't work out. In the last couple of earnings calls, management has showed excitement about "big deals" they are working on. They do this to boost the stock price. But we ask management, why is NOW the time for technology to take off? You couldn't make any money for the past seven years, when energy prices were high, yet now, miraculously, you're going to become successful? Natural gas and oil are at multi-year low prices, and there's no reason for anyone to pay attention to SYMX technology at this point.

SYMX is very similar to another "green energy" company, Capstone Turbine (NASDAQ:CPST), a manufacturer and seller of microturbines. CPST management has also talked a big game over the years and have enticed many clueless investors. (Here is an article explaining CPST's failed technology.) But it never makes any money, and likely never will. On April 19, 2016, CPST issued stock and warrants and the stock fell 25% on that day, and it has continuously fallen lower since then. Like CPST, SYMX is also going to do an equity raise soon, as the company said it will do one in its Q415 earnings call, and on April 15, 2016, filed a $75 million securities shelf.

SYMX gets its revenues from its gasification technology called "syngas" through the burning of cheap coal. This syngas is

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White Diamond Research profile picture
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Analyst’s Disclosure: I am/we are short SYMX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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Comments (16)

chaz7342 profile picture
Since this article was published, the stock is up 58%
enge2103 profile picture
Gents, I have practical commissioning and operations experience and knowledge of this what I call POX-Partial Oxydation Gassification reactions Units (6 reactors) producing lots of energy, CO and H2 gas and yes partly converted to methanol => MTBE at the MIDER 2000 TOTAL/ELF refinery at Leuna Germany - 1998/99.
Feedstock was VR-Visbreaking Residue, zero CO2 was produced at this POX plant and it was then part of the new 250.000 bpd Grass Roots ELF Oil-Refinery.

This refinery was in 1999 one year after start-up very profitable, about 900 million DM's then.

I also have experience with 3 Fisher Tropsch Synthesis Trains, part of the new grassroots MOSSGAS Oil Refinery, 1992, in South Africa, Feedstock offshore gas.
This is a process when designed and reengineered correctly will consume lots of CO2 and yes it is about 17 % more expensive to produce Synthetic Oil and gasoline/chemicals this way, depending on the feedstock costs.

However when looking at government subsidized energy production through Windmillparks at sea (Northsea), then one should realise that this type of windmill energy is about 6X more expensive when including all taxes and subsidies for the average power consumer and taxpayer than conventional produced energy from more or less clean Coal or Gas Powered Plants, which produce 0.7 or 05 tons/MWh of CO2 polution.

Windenergy has "only one" advantage that during operation each MWh produced reduces CO2 production by about 0.7 ton/hr, but at what an absurdly high costprice per MWh.
So Windmillsparks without subsidies have zero future and will surely go bancrupt, the day all very heavy government subsidies stops.

Because we still need lots of energy / power and many chemicals in lets say 50 years from now, so the idea of liquid coal conversion directly at coal mines, (what the Chinese seem to be planning) through POX-Plants and Fisher Tropsch Synthesis Plants, without CO2 production and even consuming CO2 seems having a very logical future for me as an experienced practical engineer.

How else are we going to produce our much needed power and much needed chemicals and plastics, etc. Through windmills and battery storage of power, etc?

How about oceangoing transport vessel with engines now running on very dirty, very heavy waste refinery fuel oïl containing lots of pollutants like 3.5 % of S, 1.0 % of N, 1.0 % plus of heavy metals.
Roughly 6 million barrels/day of this refinery heavy fuel misery are daily consumed now by ocean going vessels, just because it is the cheapest misery waste fuel available.
Are these ships engines goiing to run on battery electrical power or on windsails, haha a joke no? Future here is dual fuel LNG and additional on board produced 20 vol % of hydrogene. Maybe through small safe Thorium reactors on board.

So yes I am convinced that we will soon need these POX and Fisher Tropsch processus, reengineer them to produce clean energy and clean fuels and chemicals without any CO2 pollution from yes dirty black coal and/or refinery VR, AR and catcracker Slurry very dirty very heavy fuel oils. All ideal dirty feedstock for clean POX and Fisher Tropsch Synthesis Plants.

This old german clean coal technology does exist since about 100 years and yes it is now not profitable when comparing with now existing conventional power and chemical plants.

It is certainly a lot more attractive than future bancrupt windmill power and battery power storage or possibly power to gas conversion to hydrogene production, without any government subsidies.
With their rely on China, how exactly do they expect to hold onto their IP and trade secretes? I think if and when their technology proves economical, local competition will arrise, most likely an affiliate of one of their partners.
dancingmonkeys profile picture
The author failed to mention, that SYMX filed its recent $75M shelf offering on a Friday after close. Now that is sneaky.
What is written is actually quite true. How can SYMX help the pollution issue? You are pipe dreaming-- to make syngas you need to burn ash (very high content), heat nitrogen if you use air or expensive if you use oxygen. If Paulson wants to help, work on economic CO2 capture.
your comment mr leceur indicates you have minimal knowledge of their actual technology process to synthesize gas. Their process captures all co2 but you still need a place to dispose of it which is the current hurdle in carbon capture.
This article by an acknowledged shorter of the stock skimps on uses of the technology and misrepresents, in one case, the success of a partnership (Chalco buildout). It also repeats a "methane refrain" but ignores an actual use as an sng which, depending on geographic use, is actually a lot cheaper than "defrosting" imported LNG, landed at a sea port, and building infrastructure to pipe it 1500 miles inland.
You mean by expensive acid gas cleanup systems? First, they have to work (foaming problems, particulate contamination, solvent carryover, etc.) and be cost effective. Then, of course, the place to dispose off is the key as you said it. Per SCF of acid gas removed are they (SYMX) more economical? NO DATA! Maintenance data? NO DATA! Plant operations? ZZ is idle; Yima is idle according to the report. How long have they continuously operated? NO DATA! My take, not very long. According to the article, the big project talk begins and ends shortly after the Quarterly conference. Then, it is !Wait till next Quarter! Finally, you know that the Chinese are very, very, very lax on safety. It is great that they are now putting an emphasis on SAFETY. This means longer construction and startup periods. Also, greater operating expenses, but it is the right way (and only way) to go. Reaching a profit may be a lot LONGer than you think. Finally, the LNG issue: at least it is well-developed technology and not a seven-year-old being scaled up technology. Time to invest somewhere else
"according to the report" or "according to the article' says a lot in terms of specific situational knowledge-we disagree but, more importantly, is the "short" disclosure by the author. Obvious bias; especially, with the accusations of "shady' dealings and other distortions.

If you think synthesis of energy products is relatively new, look at Sasol.
chaz7342 profile picture
I would also add that the timing of this article's publication is just about the absolute worst timing possible. I mean, the PR that came out today is exactly why people should be LONG the stock. This article might have some merit if it were published anytime in the past 3 years. But not today. The timing of this article is actually comical.
dancingmonkeys profile picture
I think if you took the other side of Paulson's equities trades the past couple of years, you would have a decent chunk of money. Because John is in it, doesn't mean it is a good investment (especially in China) - For example, Sino-Forest.

SYMX's technology is licensed from a US university. If their technology is so great, why isn't anyone in the US using it? We have a lot of low rank coal too. Instead SYMX goes off to China in the past 5 years and have nothing to show for it, other than these meaningless press releases. SYMX had a Chinese deal a couple of years ago, and nothing came out of that, other then a bunch of hype. This is China so don't believe everything you hear.

On the contrary, given that the stock is up, this is the best time to sell, not go long.
chaz7342 profile picture
It was $1.30 just last week. "Stock is up" is relative I supposed.
Very true chaz7342
White Diamond Research profile picture
Now with their ridiculous PR today, which was expected, they need to raise $307M, the first project is $107M. Where will they get the money? Selling stock to gullible US investors...
chaz7342 profile picture
Have you even looked at their most recent Investor Presentation? The answer is in there.

Quite frankly, this is a horrible article. While SYMX has had its issues, the current stock price reflects that. China has a serious pollution problem, and abundance of coal, and SYMX can help with that. That's why Paulson took a 10% stake in the company.
That's an outright misstatement that SYMX has to raise 307 million. It's a partnership where they are a 49% owner. Do you really think the founder who owns upwards of 5 million shares is going to dilute himself to oblivion. If so go ahead and short some more.
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