The AI Fraud Parade
Over the past few years, we've had plenty of bogus "AI companies" and many "stretched" claims from other companies, adding an "AI angle" to their growth story. Some recent examples include iLearningEngines $AILE and ZapataAI $ZPTA.
The fraud bar was raised today with a new SPAC IPO "Investor Update" presentation from Rezolve AI $RZLV. They claim to have a platform, Brainpowa, that will power the modern e-commerce industry. Despite showing no products, they make it clear that they are not aiming to be a bit player.
Management claims they have by far the best-trained AI model for commerce available. Everything about it is "automatic" and "instant," including data acquisition and integration with existing systems. If you have an imaginary product, you might as well give it the world's highest specifications.
At the current $7.10 price, the company's market value is $1.5B. (Unfortunately, there are no shares to borrow.) Against all intuition, the play here may be to watch this on the long side for some announcements and a squeeze. Management promises many new deals in Q4 from their "pipeline of thousands" built up while they have been "under the radar."
Common Red Flags
We keep sifting through these companies to separate the fraud from the possible. Many of the frauds have some common features to look for.
- There is no clear revenue discussion. This is the most common factor. Verses AI $VRSSF, Rezolve AI, Zapata AI.)
- The solution is "too advanced for average investors to understand," which should be considered a moat. (Zapata AI.)
- Indirect distribution and partnerships with companies you never heard of or remain undisclosed. (AI Learning Engines.)
- No apparent business success or specific AI experience. (Rezolve AI.)
- It's always "an exceptional opportunity" relative to the massive market size the company will target. Valuation is never even hinted at. In one case a CEO was angry and insulted that investors asked about actual business and revenue during a presentation.
- Using feces to "paint the tape." Rezolve has pulled out the stops here. It's especially notable when they figure out how to work marquee names to hope for some halo effect: "Rezolve AI Welcomes Microsoft and BlackRock's $30B investment in AI Infrastructure as a Game-Changer for the Industry."
What's impressive about the Rezolve AI team is that they have so much detail about how their products and markets will develop and can see their ARR at over $100M by the end of next year. This is despite being "pre-revenue."
Maybe the stock can mount a huge rally at the hands of rabid retail investors and squeeze the shorts? If so, there could be an excellent chance to shorten $RZLV later.
The Rezolve AI investor update can be watched at the company IR site.