Do You Want To Invest In A123's IPO?

A123 battery

Battery startup A123 Systems set the terms for its IPO today.

It expects to sell 25.68 million shares for between $8.50 and $9 a share, giving it between $213 and $225 million in working capital. If it sells at the high end, its market cap will be around $1 billion.

It will trade on the NASDAQ with the ticker AONE, and its offering is being underwritten by Morgan Stanley and Goldman Sachs.

So, is this is a company you want to invest in? Michael Kanells at Greentech Media read through the S-1 and broke out a few numbers:

  • $168.5 million – The total in revenue accrued since early 2006 when it started selling batteries. It breaks down as: $34.3 million (2006); $41.3 million (2007); $68.5 million (2008); $10.3 million (Q1 2008); and $23.2 million (Q1 2009).
  • $146 million – Cumulative net losses. Net losses by the year have been: $15.8 million (2006); $31 million (2007); $80.5 million (2008); and $18.7 million (Q1 2009).
  • $106.3 million – The total capitalisation.
  • 75 per cent – The amount of revenue that comes from the top three customers. “We believe that the loss of one of these significant customers [BAE Systems] could have a material adverse effect on our revenue,” the S-1 states. BAE Systems, which is working with A123 on bus systems, is an interesting touch. In an earlier S-1, it said that Black &Decker “represented 70.7% of our total revenue since inception through March 31, 2008 and represented 55.1% of our total revenue in the quarter ended March 31, 2008.” Revenue dipped at the time due to a slowdown from its “most significant” customer.
  • 1,819 – The number of full-time employees as of June 1, 2009. “As of June 1, 2009, we had 1,819 full-time employees, with 227 in research and development, 1,440 in manufacturing. Of our employees, 317 are located in the United States and 1,502 are abroad.” the S-1 states. “We consider our current relationship with our employees to be good.” A123 also has 31 employees in sales and 121 in administration.

Missing from these numbers is its reliance on the government. A123 received over $300 million from private investors, while it received $249 million from the DOE for battery technology, and wants an additional $235 million from the Advanced Technology Vehicles Manufacturing Initiative. As Earth2Tech points out, this means it could have raised more money from the government than from private investors.

The problem with all these government dollars? You have to spend money to get the money. From their prospectus:

Under the DOE Battery Initiative, we will be required to spend up to one dollar of our own funds for every incentive dollar we receive, and we expect we will be required to spend one dollar of our own funds for every four dollars we borrow under the ATVM Program

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