BULLET-PROOF STOCK - HIGH-TECH PROTECTION RALLIES ARMOR HOLDINGS SHARES
PrintWORLD War II gave us the walkie-talkie and the Jeep. So maybe the legacy of the war in Iraq will be T-shirts that can stop a bullet.
If so, we'll be able to thank a Jacksonville, Fla., defense contractor called Armor Holdings Inc., the nation's largest supplier of body and vehicle armor for the war in Iraq.
Last month, Armor Holdings signed an exclusive six-year contract with the University of Delaware to develop protective body garments for military and civilian uses alike, based on patents filed jointly by the university and the Pentagon in an exotic field of high technology known as shear thickening fluids.
Since I am not Don Herbert, and this is not the "Ask Mr. Wizard" show, I won't try to explain what shear thickening fluid is made of, or why it behaves the way it does.
But I will say this much: When I was a kid, the most amazing thing I ever saw was Silly Putty, after which came my Slinky toy. But not even the greatest single invention of them all - actual, bone fide Flubber - can go mano-a-mano with a bucket of shear thickening fluid.
This stuff is even better than that puddle of mercury that keeps forming itself into a Los Angeles cop in "Terminator II." In fact, it might even be better than Kryptonite, and that's saying something!
I mean, if Mr. Wizard were to take a tongue depresser and stick it in a beaker of this glop, he'd be able to stir it if he stirred reeally slooowly. But if you stirred it any faster, the whole beaker of glop would instantlysolidifyintoasolidbrickhardmass. Then if he stopped stirring, it would all become liquid again.
Why does it act like this? I dunno, but it does. And if you soak it into some fabric and let it dry, it acts the same way. If you try to stab an ice pick or knife into it, you can't. The fabric instantly becomes rock hard and impenetrable at exactly the point of impact, diffusing the energy of the stabbing motion.
And once the stabbing pressure ends, the fabric returns instantly to its original and flexible state.
It really does this. Really. It does.
Risks galore await the unwary in almost any field of high-tech investing, and the world of shear thickening fluids is no exception. But buried in its baffling argot at least lurks a genuine field of scientific research, along with a legitimate and established company that is trying to capitalize on it.
COMPARE that to two other allegedly high-tech outfits that have captured the fancy of tech-stock fans on Wall Street lately: an Arizona defense contractor named Ionatron Inc., and a Florida-based company called GlobeTel Communications Corp.
Each has been covered extensively in this space over the last year, and this week there is more to report on both, featuring a type of top level management disarray that should be red flags to any prudent investor.
Ionatron Inc., which claims to have developed a new laser-based device able to detect and safely detonate roadside explosive devices in Iraq, is the brainchild of a longtime Wall Street scofflaw named Robert Howard, who built the business out of the remnants of a failed penny-stock company in the lawn-care business.
Two weeks ago, this column disclosed that Ionatron is the subject of an ongoing SEC investigation, possibly in connection with the activities of its largest investor, a secretive hedge fund called SAC Capital Advisors.
Two days before the column appeared, Ionatron's key contact man with the Pentagon, a retired rear admiral named Thomas Steffens, abruptly resigned from the company, without explanation, after only four weeks on the job.
Last week, the company's founder, Howard, resigned as well, citing advancing age and ill health as reasons for leaving as chairman of the board. He continues to serve as chairman of a separate, publicly traded company called ICAD Inc., which he also founded.
The situation at GlobeTel Communications is much the same. This company began life as a Nevada homebuilder, after which it morphed into the syphilis-detection business, then into the wacko business of developing aluminum blimps.
Now, the company claims to have signed a $600 million contract to develop a cellular-telephone network for the 30 largest cities in Russia.
Much of the company's credibility has hinged on the reputation of the chairman of its board, Sir Christopher Meyer, a former British ambassador to the U.S. But last week, Meyer resigned from the board without explanation.
This sort of thing simply hasn't gone on at Armor Holdings, which began life under the name American Body Armor in 1969 and has stayed in the field ever since.
In 1996, the company was taken over by a Greenwich financier named Warren Kanders, who built the business through a series of complementary acquisitions, from $10 million in annual revenues to more than $1.6 billion last year.
In 2001, the company acquired an armored-vehicle business that had been spun off from Kroll Inc. in the breakup of that company. And that acquisition, in turn, brought with it a Pentagon contract to equip Humvees with armor plating.
From a schedule of 40 vehicles per month the contract has now ballooned to armor plating for 650 vehicles per month following the invasion of Iraq.
It is this background that made Armor Holdings attractive as a business partner for the U.S. Army Research Lab and the University of Delaware Center for Composite Materials. Their goal: to develop and commercialize their joint research into shear thickening fluid as a technology for strengthening the protective qualities of fabric-based "soft body armor."
For their part, the folks at Armor Holdings say they're planning to begin marketing the product to the corrections industry later this year, and that military applications will only come later on.
Why the delay? Company officials said they want to take things slow to make sure the product works reliably in one application or environment before moving to the next one.
They also speak of shear thickening fluid as something that won't replace body-armor fabrics but simply enable the company to produce lighter garments that still have the protective power of the heavier, bulkier body armor now in use.
BUT this is all just the beginning - the first generation of this strange and fascinating material. And for the next six years, Armor Holdings has an ironclad lock on its use when it comes to anything a human being can wear.
At the end of all that, the pursuit of commercial markets for super-Flubber may have led to nothing - or perhaps have launched the world on a new arms race in bullet-proof T-shirts.
Either way, an investor can at least have confidence that the company leading the charge knew what it was doing, which is more than can be said about many of Wall Street's other high-tech darlings.
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Firm of steel
Defense contractor Armor Holdings shares have been on a roll, and now the company is planning to market a solution that could make ordinary clothes bullet-proof.
Armor Holdings : Friday’s Close: $57.67 (-46 cents)
