Apple, LG and Valve did not invest in OLED display maker eMagin

Update: A source very close to Apple says that the company has not invested in OLED display maker eMagin — and, according to a statement eMagin has now also published, nor have Valve and LG:

“eMagin Corporation, or the “Company,” (NYSE American:EMAN) a leader in the development, design and manufacture of Active Matrix OLED microdisplays for high resolution imaging products, today is providing clarification in response to a media report in which the author apparently misconstrued a form underwriting agreement that the Company filed as an exhibit to its S-1 on January 23, 2018 and incorrectly stated that a group of certain consumer electronics companies participated in the recent offering of the Company that closed on January 29,2018. As of today, to the Company’s knowledge, none of these consumer electronics companies have taken part in the offering.”

The notice of the three companies, along with two others, investing in a round for the company appeared in an SEC filing for a fundraising that the company advertised, under a list entitled, “Specified Investors”. As we pointed out in our original report, below, the filing from the end of January was tipped to us by the blog Road to VR.

“Wishful thinking,” said a source to us. Another speculates that this may have been a right of first refusal — although, to be clear, we have no clue whether Apple and the others have a pre-existent relationship to merit that.

The news sent the stock for this relatively modest company soaring over 17 percent, adding nearly $10 million to its market cap, ending at $59 million.

Original article about the filing is below.

Quietly, Apple has been bringing together a number of moving parts in its strategy around virtual and augmented reality hardware; and it appears now one more element of that has come to light. eMagin, a maker of OLED miniature displays, says that Apple, along with LG, Valve, VR entertainment maker Immerex (which now appears to be operating publicly as Luci), and Stillwater Holdings, are collectively investing up to $10.6 million in the company.

eMagin has only said that it plans to use the proceeds for “working capital and general corporate purposes”. The company has been increasingly doing more in displays targeting the consumer market (such as its Blaze night-vision goggles and smartphone case, goggles pictured above) in addition to the military and industrial/enterprise (including medical) sectors where eMagin’s technology is already used.

“We believe that a key growth area for us is the consumer electronic OEM market for augmented reality (AR) and virtual reality (VR) hardware,” eMagin notes in its prospectus. “Our potential channels to this market include licensing of our direct patterning technology and partnering for the mass production of microdisplays.”

The documentation for the new offering was filed January 23 of this year (first discovered, it looks like, by Road to VR, which also tipped us off on it). Further to that, eMagin released another statement saying the offering had been upsized to $11.5 million (with eMagin getting $10.6 million in proceeds), and it also said that it expected the offering to close around January 29, meaning the investment has likely been completed already.

We have reached out to eMagin to confirm this, as well as the final amount raised, and if the company can tell us more about the intention for the investment.

eMagin’s technology is notable in that it has created a new kind of display that can be used in VR headsets, which provides a sharper image by using a denser layout of lines (versus the pixels commonly used in existing products).

The promise is for up to 2,500 pixels per inch, high when you consider that an iPhone X is currently 458 pixels/inch and Samsung is reportedly working on a headset with 2,000 ppi. This helps reduces the so-called “screen door” effect on the display and makes what you see up close through the headset much sharper. (Notably, those investing in eMagin aren’t putting all their eggs into one basket on this front, it seems: LG has also patented another way of coping with the issue, and there are other routes beyond OLED that are also being explored, such as liquid crystal on silicon displays.)

“We believe that our direct patterning technology is a key differentiator for enabling next generation AR/VR hardware for the consumer and enterprise segments because of the brightness and the pixel density afforded by the technology,” the company notes.

Although eMagin is arguably working at what might become the forefront of how VR experiences are delivered, the company has been fairly under the radar and modest in size — underscoring perhaps how we have yet to see a real breakthrough of the technology in terms of market penetration. Even Apple’s CEO Tim Cook has downplayed the state of technology today and how so far we’re seeing little evidence of mass-consumer appetite for it.

eMagin is traded on the NYSE American exchange and currently has a market cap of around $50.7 million and expects to report revenues of around $22 million for 2017. Its share price has shot up by nearly 14 percent in pre-market trading over the weekend (likely because of this news).

This investment is interesting because it shows, in fact, that if VR may still have a ways to go before we see a breakout device, big tech companies are very much putting some money down to stake VR claims for the future.

In the prospectus for the investment, eMagin notes that it is working with a number of unnamed “Tier One” companies to help get better economies of scale when manufacturing its new technology.

“On the commercial front, we entered into strategic agreements with multiple Tier One consumer product companies for the design and development of microdisplays for consumer head mounted devices and, together with these companies, negotiated with mass production manufacturers for higher volume production capabilities,” it writes.

Interestingly, while Valve and LG’s involvement in VR is well documented — Valve on the software side, making games and its SteamVR platform; LG as a maker of headsets, including one reportedly built on SteamVR — Apple’s involvement has been harder to parse because the company generally keeps quiet on its future plans.

Case in point: when we uncovered in November that Apple had acquired VR headset maker Vrvana for around $30 million, it refused to confirm the deal to us, although it did not deny it. Other acquisitions that Apple has made in the general area of mixed reality include SMI, an eye-tracking firm that was working on solutions for VR and AR headsets; Flyby MediametaioEmotient, and Faceshift.

We are contacting Apple, Valve and LG to see if any of them provide any further comment about their stake and interest in eMagin, and we’ll update this if and when the company responds.

This is not the first time that Apple would have invested in companies that it works with closely for its hardware.

The company had a long product and investment relationship with UK-based graphics chipset vendor Imagination Technologies, and nearly considered acquiring it, before the two entered into a dispute, and Imagination was ultimately broken up and sold to others.

In December, Apple also announced an investment of $390 million into Finisar, an optical component maker, part of a bigger plan to build a facility together in Texas.

While this appears to be the first time that a relationship between eMagin and Apple has come to light, there were some who had noticed some increased communication between the two companies last year, leading them to wonder if they were working together.