Chapter 63. Thomas Motors (2)

"There are also some issues with the NASDAQ listing process."

To enter the exchange, a company must go through an Initial Public Offering (IPO) process.

The conditions for an IPO are quite stringent.

The exchange thoroughly examines the company's revenue, profit, financial condition, and technological capabilities, and also reviews whether the offering price is appropriate.

Many companies drop out at this stage and give up on listing.

"Instead of going through the IPO process, Thomas merged with a SPAC to achieve a backdoor listing."

A SPAC (Special Purpose Acquisition Company) is a company formed for the purpose of acquiring a private company. Essentially a shell company, it is listed with the sole purpose of acquiring and merging with a private company. When the SPAC acquires and merges with a private company, the SPAC dissolves and the acquired company takes its place.

This backdoor listing has several advantages.

It allows for a quicker entry into the exchange, and the review process is less stringent compared to an IPO.

"Indeed, it seems a bit odd. If they had gone through an IPO, it would have been quite successful."

"There are more than a few strange points, but the strangest is the CEO."

Thomas Motors CEO, Brad Button.

He originally worked as a salesman, selling car parts. Seeing the rapid growth of online shopping, he quickly set up a shopping mall.

The performance of the shopping mall was not impressive.

However, Brad Button's talent shone in selling companies rather than products.

He used a macro program to inflate the number of visitors to the shopping mall, making it appear ten times more popular, and sold it for $1 million.

The shopping mall he created closed down three months after acquisition, but Brad Button made $1 million.

From this point, he realized that creating and selling companies could be profitable, and he began his business in earnest.

He then set up a company that claimed to modify diesel engines. He asserted that by connecting a special machine to the engine, it could reduce harmful emissions by 30% and improve fuel efficiency by 20%.

I was amazed and said, "Wow! Car companies invest billions of dollars each year in R&D to improve fuel efficiency and reduce harmful emissions. Was there such a simple solution all along?"

At this point, wouldn't all the car company researchers need to be fired?

"Of course, it wasn't real."

Despite the skepticism, someone was surprisingly deceived.

A car parts company listed on NASDAQ acquired this company for $15 million. As expected, such technology did not exist.

It was merely a matter of temporarily adjusting the engine's output to make the inspection results show those figures.

After making money a few times, Brad Button finally founded Thomas Motors.

Interestingly, it initially had little to do with hydrogen cars.

He only announced that he would collaborate with various car parts companies to develop eco-friendly vehicles.

While it was unclear what kind of car it would be, Brad Button realized that people were enthusiastic about hydrogen cars.

This is because hydrogen cars, along with electric vehicles, are seen as the future of the automotive industry, but no company has yet dominated the market.

If he could create such a company, it would be easy to attract investors.

He quickly announced that he would develop a hydrogen truck and pledged to build a hydrogen infrastructure across the United States.

This is an era of the Fourth Industrial Revolution, where all industries are undergoing significant changes.

When a good idea emerges, investors pour in money. As a result, there are many companies that survive solely on investment capital without a clear revenue model.

Of course, some of these companies do survive and dominate the market, but...

"Hydrogen production, transportation, natural gas wells, charging stations, hydrogen trucks, and so on. He announced many things, but none of them have been realized."

Despite this, the board of directors was impressive.

He hired experts from Enfl and Gubl who were developing electric vehicles, and appointed Nobel laureate Roger Kite as an external director.

"Wow! A Nobel Prize!"

"Actually, the field of research is not particularly relevant."

However, the Nobel Prize title was convincing enough for the public.

The stock price rose by more than 10% when it was announced that a Nobel laureate professor had joined the board.

"So, everyone was deceived?"

Logically, it's easier to deceive a few people than many. However, sometimes the opposite happens.

If someone offers an opportunity to make a lot of money, you would naturally be suspicious.

You would wonder about the company, whether it really has a good idea, and why they are offering you such an opportunity.

But what if well-known figures, professors, doctors, and lawyers had already invested? The fact that much smarter and better people had invested would naturally make you believe.

In fact, in many pyramid scheme cases, the victims are often highly educated and professionals.

"People tend to believe what others believe. During the Madoff fraud, many celebrities were caught, too."

Bernard Madoff was a fund manager who had been the chairman of the NASDAQ stock exchange.

He promised a 10% annual return and attracted investment funds. He actually paid 10% annually to investors, and as word spread, more investment poured in.

So, how did he make money from his investments?

Surprisingly, he did nothing.

He simply paid the earlier investors with the money from later investors. When the money stopped coming in, the fraud was exposed.

The total loss was a staggering $65 billion.

It was the largest Ponzi scheme in history, surpassing even Charles Ponzi and Jo Hee-bul. Many of the victims were well-known figures, including film directors, Hollywood stars, and sports team owners. Some even introduced each other to the scheme.

It's not easy to uncover the truth when everyone is being deceived.

"Even Hwahang Group and GM were caught in this."

"Dreams are the easiest words to tempt people. If you think about the bright future ahead, a current loss is not a big deal."

"Maybe it could become the second Theranos."

"It will be even worse."

At the time of the scandal, Theranos was a private company valued at $10 billion. However, Thomas Motors is a listed company with a market capitalization four times larger.

As a leader in the hydrogen energy sector, it will have a significant impact on the entire industry.

It will be a massive scandal that can shake Wall Street!

* * *

We began a thorough analysis of the company.

Morris showed us a video on his laptop. It was a scene from an event a year ago where Brad Button introduced the T1 FCV.

At that time, investors were skeptical about whether Thomas Motors had the capability to develop hydrogen cars, and the stock price was stagnant.

In response to the negative articles, he proudly unveiled a new car.

A giant hydrogen truck slowly moved forward from behind the stage.

"After hearing from a friend, I analyzed all the videos that had been released. That's when I noticed something strange in this video."

"What is it?"

Morris paused the video and zoomed in.

"Do you see this?"

Upon closer inspection, a thick cable was visible between the wheel bases.

"There's a cable attached to the truck."

"It's likely connected to the stage below to receive power."

"So, it moved by being connected to a cable?"

"Yes."

Moving a motor slowly over a short distance is not difficult. RC cars roll with just batteries.

If a cable was connected for a distance of less than 10 meters, it means there was no hydrogen fuel cell, let alone a battery.

"Isn't this fraud?"

David said with a sneer.

"Given his track record, it wouldn't be surprising if he had been sued dozens of times. Companies that dealt with him considered suing several times but found it useless. While he made all sorts of exaggerated and false claims, he cleverly avoided the core issues. It's more about making the other party think what they want to believe rather than outright lying."

I whistled.

"It seems not just anyone can be a fraudster."

After all, it's not easy to deceive someone smarter than yourself.

I asked Morris,

"But didn't they release a video of the truck actually driving after the event?"

"Yes, this one."

Under a blue sky, the T1 FCV drove smoothly on a two-lane road between grasslands.

"There's no cable in this video."

"Of course not. It would be impossible outside."

Thomas Motors released this video two months after the new car announcement.

Some media and research companies still questioned whether the truck shown at the event could actually drive.

In response, Brad Button proudly released this video.

The effect was significant.

After the video was released, the stock price rose by 30%, and people no longer doubted Thomas Motors' technological capabilities.

Edward said,

"It's impossible to make a car that could only move with a cable drive within two months."

"So, it must have been manipulated."

"At first, I suspected it was CG. But experts said there were no signs of tampering. Next, I suspected it used a diesel engine, but the vehicle structure made that unlikely."

The T1 FCV was developed as a hydrogen truck, so its structure is completely different from a regular truck.

Moreover, just installing an engine doesn't make a car move. A transmission, fuel tank, cooling system, and powertrain must be installed.

"So, what do you think now?"

"I suspect it might be an electric truck. If enough batteries were connected, it could be made to drive temporarily."

"Even if it's an electric truck, considerable technology would be needed to make a truck of that size drive at 60 miles per hour."

"That's true."

This video is the most crucial clue to exposing Thomas Motors' fraud.

Of course, I know how they filmed it. Once you know, it's a surprisingly simple trick.

"Was it filmed rolling down a hill?"

There was a moment of silence after my words.

Everyone looked at me with wide eyes.

"What do you mean?"

"If the gear is in neutral and you take your foot off the brake, the car will roll. Especially on a slope, with that much weight, it would gain considerable speed as it rolled down."

Everyone burst out laughing.

"Ha ha!"

"No way."

"Does that make sense?"

Well, such a reaction is natural.

If they hadn't released the video, that would be one thing, but they wouldn't have filmed it rolling down a hill and presented it as a driving scene, right?

...But that's exactly what happened.