July 8th, 2021
How to Profit on Tattoo Regret
Dear Retail Investor,
As I watched the face-tattooed young man work behind the counter of my local coffee shop, he thanked the woman in front of me for her order.
That’s when I realized, I recognized his voice.
He was Josh, the son of a good friend.
I hadn’t seen Josh in nearly 10 years, when he was just a shy teenager.
Now here he was, a late-20s something working as a barista.
“Hello, Josh,” I said. “It’s been a long time – how are you?”
“Mr. Fogel?” he said, almost sheepishly. “I’m good, I guess… yeah, it’s been awhile.”
Business was slow that morning, so we chatted a couple of minutes as he made my double cappuccino.
I couldn’t help but ask about his tattoo.
“I had it done in college,” he said. “I thought it was pretty cool back then.”
But now, he said, it was a major hindrance in his quest for a professional job.
“I’ve been on a bunch of interviews, but they never call me back,” he said, sounding flustered. “I’m sure it’s the tattoo… I wish I had the money to get rid of it.”
Josh – like millions of other millennials – suffers from “tattoo regret”
Half of all millennials have tattoos. And a growing number of them deeply regret it.
So more and more of them are seeking treatment to get their tattoos removed.
Now, they’re finding out that the price to do so can be staggering.
Just to remove a single tattoo through laser treatments, it can take up to 15 painful lasering sessions… spaced out over two years… with each treatment costing hundreds of dollars.
By the time it’s all over, removing a single tattoo can easily run $3,500.
But a much cheaper alternative will soon be available.
Introducing rapid acoustic pulse technology
Rapid acoustic pulse technology (RAP) was developed by Soliton (Nasdaq: SOLY), a Houston-based medical device company.
A RAP device works by rapidly shooting highly tuned acoustic shockwaves that literally blast apart cellular structures that hold tattoo ink in place.
When I say rapid, I mean rapid – these shockwaves are machine-gunned out at 100 times a second.
Yet they’re virtually painless and cause no skin damage.
By contrast, in the alternative and most common laser tattoo removal procedure, the lasers shoot out pulses of light energy, with each pulse penetrating the skin.
The tattoo ink in the skin absorbs this energy… getting hotter and hotter as more pulses are shot out… until all that heat shatters particles of ink into tiny fragments.
Multiple treatments – up to 15 – are needed because each pass of the laser only removes the top layer of ink particles.
Unfortunately, it’s impossible to remove any more than that in one session with lasers alone.
That’s because the particles released from the top of each cluster of ink end up shielding the rest of the agglomeration of ink from the laser beam.
Worse, the laser is stopped by tiny steam-filled vacuoles that form over the agglomeration because of the treatment.
Another pass can’t be done until these vacuoles have been reabsorbed by the body, and the released ink particles have been carried away by white blood cells.
That typically takes up to six weeks (which is why using short pulse lasers takes multiple treatments to completely erase a tattoo).
But when you combine RAP with short pulse lasers, results come much faster.
Using RAP with short pulse lasers drastically shortens tattoo removal time
Here’s how –
Right after an initial laser pass is performed, RAP is used to send acoustic pulses through the skin.
This removes the vacuoles and causes the ink particles to disperse.
As a result, another laser pass can be performed in a matter of minutes (with up to four passes being performed in a single session).
Soliton co-founder Walter Klemp believes his RAP technology will completely transform the tattoo removal business.
“We can accelerate tattoo removal to the point that just two or three office visits can remove a tattoo instead of 10 to 15,” he said. “We think that’s a real game changer.”
So does Wall Street.
Since the FDA approved RAP for tattoo removal in March 2019, the stock’s surged from just under $10 to just over $22 as of July 6.
Another catalyst for that gain was the FDA’s Feb. 2021 approval, allowing RAP to be used for improving the appearance of cellulite.
Unfortunately, it’s too late for investors to ride Soliton to higher highs.
Pharmaceutical giant AbbVie (Nasdaq: ABBV) is buying out Soliton
The buyout was announced on May 10, 2021 and is going through a company AbbVie owns, Allergen Aesthetics.
That pretty much kills any chance everyday investors have on profiting from Soliton’s RAP technology.
Of course, you could buy ABBV itself.
But that wouldn’t be a pure play on RAP because ABBV – a $202 billion drug company – has its hands in many more pies than just tattoo and cellulite removal.
The sad truth is, it’s tough for retail investors to find a play on any tattoo removal company, as most are privately owned.
The major exception is Cutera, Inc. (Nasdaq: CUTR), whose tattoo removal technology is laser-based.
That company – as have many medical device manufacturers – has done extremely well of late.
This year it’s more than doubled, shooting up from $24.21 to $47.78.
It’s probably a good long-term buy (although if I were to play it, I’d consider deep in-the-money options with several months to expiration).
That’s it for now.
I’ll close by saying that Soliton’s RAP technology is scheduled to be rolled out some time in 2021.
I think Josh, and many other Millennials, will be taking advantage of it.
Until next time,
Contributing Editor, Dear Retail
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