Trolls, Gaslighting, and Precognition
Ezra Marbach posted a nice transcript of ChromaDex's presentation last week at the LD Microcap Conference. It's all full of the effusive excitement about Nicotinamide Riboside that retail investors like me have come to know and love and hate all at once.
Tru Niagen literally gives you more energy, in the form of ATP, and if you elevate NAD you improve the effectiveness of cell repair mechanisms. It's an incredible ingredient, for which we are growing a global brand, backed by Li Ka Shing and Iconiq Capital, and led by Watsons, which has 14,000 stores. ChromaDex's management team is filled with veterans from billion-dollar businesses, like Mattel, Herbalife, Guthy-Renker, Nestle, etc. 168 collaborative agreements have resulted in 100 published studies with great results. Excellent patent portfolio. Very dramatic sales growth, and the renewal rate is "extremely high" -- people who start taking it keep taking it. The addressable market isn't just all human beings, because there's a big pet food business, too. We're putting an infrastructure in place in anticipation of becoming a larger company.
How do you read that and not get excited?
Well most people don't seem to get too excited. The share price this week hit a 52-week low. The retail investors, already a notoriously rowdy bunch of bleacher bums, are beside themselves:
Frank's a moron. Rob is an idiot. The ump is blind. This beer sucks. The marketing sucks. Everyone they hire is either junior and incompetent or excessively experienced and too expensive. Why are so many stock options being given out? Anyone could sell Niagen -- these people are the worst, most incompetent, etc.
But as ungrateful and unsympathetic as the bleacher bums inevitably are, they tirelessly evangelize the product, Tru Niagen.
And in any case, when it comes to negativity, the bleacher bums in their dollar seats don't hold a candle to the Anonymous Troll Brigade, which is downright vicious in their attacks, lies, false accusations, misattributions, and defamations.
So I feel like I'm being gaslighted, but I can't figure out whether to blame the company for telling us everything is going to come out great, or whether it's the bleacher bums telling us everything is going badly, or whether it's the Anonymous Troll Brigade telling us we're all doomed.
My intuition is that the truth is about equidistant between the company's and the bleacher bums' positions.
On the company's behalf, I can make up stories about why we are working hard to get into small markets like New Zealand and Turkey while American distribution channels lie dormant, but I don't quite believe them. Same with the 40% year-over-year sales growth -- with all that marketing, and word-of-mouth, and extremely high retention, how could year-over-year growth be ONLY 40%?
On the other hand, the bleacher bums literally have never tried to build a global consumer products company from scratch, and there is stuff that just takes time -- in the same way that nine women can't join forces to gestate a baby in one month, building the organizational and technical infrastructure to successfully distribute and service $100M/year in goods takes some doing and there are external limits on speed.
So I console myself that everybody on the new management team has done this stuff to scale already and knows how it goes, so rookie errors probably won't occur, and we'll be able to move in the right direction about as quickly as can be done. And their incentives are all lined up right.
But at least on the legal part of the business I can be a little more confident of my assessment. When ChromaDex says it will aggressively defend its intellectual property, I can say with a lot of confidence that they are walking the talk. Just on paper -- e.g., Steptoe and Haley Guiliano versus Foley Hoag in DC and Delaware -- ChromaDex is hiring better firms. But if you then READ the papers, especially Cooley's more recent stuff, ChromaDex is getting better lawyering -- stronger arguments, more powerfully presented, with less frivolous noise. More partner oversight, less associates-gone-wild.
On the other hand, there are these voices of doubt, these vile Trolls that keep telling us that somehow ChromaDex will be punished for having been victimized or nearly-victimized by Honig-and-friends, that Honig's ghost haunts the company and controls its actions -- even though Honig already sold most or all of his shares and has no role. But someone who knew Honig is still there! And if you say good things about ChromaDex, then you aren't expressing honest enthusiasm. You are not even merely mistaken. You are a pump-and-dump-scammer who is trying to rip off everyone else. Many in the community, not just me, are vilified and mocked.
I haven't recently written about the trolls infesting the Yahoo Finance CDXC message board, but the Troll Wars have continued unabated. Geoff the Troll has been joined by Chuck-the-Troll, with occasional cheerleading by others, such as Markie-the-Troll and James-the-Troll.
The big questions are (1) Who are they? and (2) Why are they here? I will suggest an answer.
There are many theories. They could be:
Elysium's PR Firm (Terrakeet)
Others with unrelated grudges against ChromaDex
Drive down the share price to limit ChromaDex's strategic options
Drive down the share price to prevent ChromaDex from gaining additional investors
Drive down the share price to prevent ChromaDex from gaining credibility
Introduce doubts about the integrity of ChromaDex or its products
And/or they are deluded into thinking that anything that happens on the Yahoo Finance message board matters in the slightest
I suggested earlier this year that I thought there was some connection between Skadden and Geoff -- which I still think -- but it's hard to know exactly what the connection is (or was, since Darth Sacca now commands a Baker-class instead of a Skadden-class war ship).
The weird thing about the trolls is that they occasionally exhibit precognition.
For example, last March a Troll calling itself "obs" posted,
"Study will show NR is hydrolyzed in the GI and its all about nicotinamide. Keep buying those expensive precursors!...I know a lot more than I can say."
The following month the isotope study was released (we covered it here), in which the authors (one of whom was Elysium's expert witness in the PTAB proceeding) claimed to have discovered that oral NR and NMN had "systemic effects similar to or indistinguishable from oral NAM."
So here was a troll with some confidential inside information from an unreleased study who felt safe anonymously leaking it on the Yahoo Finance message board in support of an attack on ChromaDex or its shareholders.
Then in October a Troll named "Greg" posted this eerily prescient warning to me, in which he asserted that I "state quite boldly that you aren't regulated by the FDA, but Affiliates are indeed responsible for the claims they make."
About ten days later, Elysium filed a complaint in New York devoting 15 paragraphs to my blog (we covered it here) mostly focused on that single flippant remark buried in the 4th or 5th paragraph of my disclaimer, in which I stated that the FDA does not regulate me. Obviously I did not say that I am immune from the law (including laws governing commercial speech), nor did I say that I am not responsible for the claims I make, nor did I make any illegal statements (it's not illegal to list the various research studies that show the potential health benefits of NR).
But it's uncanny that Greg appeared just in time to denounce that obscure comment buried in my disclaimer, RIGHT before Elysium made a federal case out of the exact same sentence fragment. You'd swear that Greg somehow had early access to the papers that Elysium's lawyers were preparing to file. Indeed, I feel certain that he did, which only strengthens my belief that these Trolls are associated with Elysium.
And now in December we have what may be another act of precognition.
Chuck-the-Troll has discovered a legal argument that could be helpful to Elysium. But he wasn't willing to say what the argument was. Instead, he wanted me to figure it out and have me say the argument. Over a number of posts he dribbled out hints. Why?
Below is what he said.
In case you don't want to wade through the tiny print, here are the key parts:
"...Everyone just thinks ChromaDex can win the patent lawsuit and that is the end of Elysium. It would be a surprise if winning doesn't necessarily mean Elysium stops selling, right?...It was a big supreme court decision from the past fifteen years...In case you don't know what I am talking about, here is another tip. Chromadex may live to regret all that "once in a lifetime ingredient" "we have a responsibility to humanity stuff"...(I)t does seem like maybe [Shelly] has never heard of the Supreme Court's 2006 decision throwing out the previous practice of automatically letting the winner in a patent lawsuit block sales by an infringing party...Do you think a court might believe that maybe it is in the public interest that the infringer keep doing what it's doing and just pays a modest royalty back to the patent holder?"
What Chuck-the-Troll is no doubt referring to would be the Supreme Court's decision in eBay v. MercExchange. You can read a good analysis of the decision here by Finnegan, including subsequent judicial interpretation, and here is some criticism of the decision.
The main legal point in eBay is that courts are allowed to require an infringer to pay royalties, under some circumstances, rather than enjoin the infringement. It's pretty clear that this rule was developed to deal with non-practicing entities who would block a technology from being sold without selling it themselves, which isn't our situation. Moreover, it would not be difficult for ChromaDex to show that Elysium's presence in the market causes irreparable harm to ChromaDex, thus warranting an injunction.
In fact, it's more like Elysium's wet dream to suggest, as Chuck-the-Troll does, that a Court would find that NR was an essential medicine and that ChromaDex was unwilling or unable to bring it to the masses without Elysium's help.
Leaving aside the dreamy nature of the argument, or the Finnegan analysis noting that permanent injunctions are typically granted except in a few cases that look different from ours, and leaving aside the fact that years of infringement damages trebled, plus a permanent cost-disadvantage would probably prevent Elysium from doing business post-judgment regardless of the legal issues, putting aside the legal issues ENTIRELY...
Why would Chuck-the-Troll be bringing us this argument, and where would he get it from?
His words are not the words of a short-seller, because a short-seller would take no consolation in ChromaDex's prevailing in the litigation, winning damages (maybe even trebled!), and getting a permanent royalty from Elysium. That outcome wouldn't help shorts very much.
No, this is an argument that sounds very much like it originates from Elysium itself, filled with wishful thinking and a sense of moral vindication or even invincibility for Elysium.
Or it could be that Chuck-the-Troll simply hates Shelly Albaum and wants to show that I might be wrong about something. He certainly wouldn't be the first! But that begs the question of WHY Chuck-the-Troll would hate Shelly Albaum, if Chuck-the-Troll were not pretty tightly associated with Elysium?
And it also begs the question of why Chuck-the-Troll would be gaming out what would happen under various legal scenarios and checking the applicability of old precedents. That's the kind of the thing that lawyers do, but no one who is interested in CDXC stock -- either short or long -- cares about vindicating Elysium's right to license after it loses its lawsuits and is faced with a multi-million dollar infringement claims.
Nor does a short or long CDXC shareholder care whether Shelly Albaum can be proved to have made a mistake in his life (he has), or has not considered every legal scenario (he has not). Only Elysium cares about those things.
In fact, the trolls seem to be baiting me persistently to compromise myself -- for example, they refer to me as "legal advisor to this forum," which of course I am not. They challenge me to opine on the quality of ChromaDex's patents (I don't have any independent way of assessing them). They put words in my mouth attributing to me legal analyses and predictions that I did not make. Are they trying to find some way of dragging me into the lawsuit? That's exactly what Elysium has done by doting on my blog in its most recent New York counterclaims. And why would anyone BESIDES Elysium want to drag me into the lawsuit, or even want to intimidate me into silence?
Once again, I don't know the answers to these questions, but I am increasingly convinced that these Trolls are not just random short sellers or third parties with a grudge against ChromaDex. I think instead that the nefariously conceived plan that ChromaDex alleges in New York is real, and it's ongoing, and Elysium is using Yahoo's public forum to advance its hostile agenda. In other words, I now suspect, the connection between Geoff and Skadden was not that Geoff was a Skadden attorney, but that Geoff was a Skadden client.
If that were true, then we might all get dragged into the lawsuit as witnesses to Elysium's "nefariously conceived plan to damage ChromaDex's ...reputation ...and stature in the industry..." through anonymous activity on public message boards.
Which means I also think that the reason that Chuck didn't want to explicate the legal argument based on eBay v. MercExchange is because Chuck was previewing a legal document that Foley is going to be filing in Delaware, and he wanted to sow doubt without appearing to have had early access to Elysium's legal arguments.
So we'll be watching the legal filings to see if Elysium makes an argument based on the reasoning in eBay v. MercExchange, which, if it occurs, will be ANOTHER feat of precognition by the Anonymous Troll Brigade which is capable of reading Elysium's mind (or at least the mind of Elysium's law firm).
Or maybe I'm wrong, and the people I am calling Trolls are really good samaritans come to rescue ChromaDex retail shareholders from a deceitful band of malevolent former senior executives from Mattel, Herbalife, Nestle, and Guthy-Renker LED by a malevolent movie producer. And despite our endlessly inviting these good samaritans to get lost, out of their essential goodness, they keep trying to help rescue us poor retail shareholders.
It WOULD be a great movie. But not a documentary -- definitely fantasy.