A123 Systems Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of A123 Systems (Nasdaq: AONE  ) fell 12% today after the company announced a dilutive stock offering.

So what: A123 plans to offer 18 million shares of common stock and $125 million of convertible subordinated notes, with an option for underwriters to purchase an additional 2.7 million shares and $18.75 million in notes. Pricing for shares and an interest rate for the notes have not been released, but the market isn’t happy about being diluted once again.

Now what: A123 Systems has shown promise for a long time, but its production just hasn't ramped up the way the company anticipated. Worse yet, A123 has burned cash at an incredible rate, plowing through $323 million from 2009 to 2010, with no end in sight to the losses. I wasn’t excited about shares earlier this month, and I see no reason to buy the dip today. Until A123 can show us some solid profits, investors are in for nothing but disappointment.

Interested in more info on A123 Systems? Add it to your watchlist.

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Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.


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  • Report this Comment On March 30, 2011, at 10:32 AM, buffalonate wrote:

    GE is part owner of them and I wouldn't be surprised if they end up buying them totally.

  • Report this Comment On March 30, 2011, at 11:03 AM, TMFFlushDraw wrote:

    @buffalonate

    Hmmm, they have a pretty small stake in the company right now and with a $1.0 billion price tag (with premium) and no sign of the cash burn slowing down I wonder about the logic behind a deal?

    It's an interesting idea...

    Travis Hoium

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