It's never easy to see a good idea go to waste. But when you're talking about a nascent industry, that's part of the process. Good ideas thrive and lesser ideas fall by the wayside. Thus is the story of these three companies that are on the ropes right now.
A battery idea gone terribly wrong
When Ener1 (Nasdaq: HEV ) came out of the gate, the expectations were gangbusters. Even the government got excited, giving the company a $118.5 million grant from the Department of Energy.
But technology is only important if you have customers who are willing to buy it. Ener1 saw Ford (NYSE: F ) and GM (NYSE: GM ) hook up with LG Chem, A123 Systems (Nasdaq: AONE ) take Fisker and Smith Electric, leaving Ener1 to tie its boat to Th!nk's anchor. That bet blew up last week when the company said it would write off its $59.4 million investment in the company.
Now Ener1 has just $19.4 million in unrestricted cash, compared to $126.8 million at A123, and a burn rate that would make even a risk-tolerant investor woozy. Ener1 will have to pull a big rabbit out of the hat to turn this one around.
Two solar stories, same ending
Energy Conversion Devices (Nasdaq: ENER ) and Evergreen Solar (Nasdaq: ESLR ) have been selling the same story for quite some time now. Both have superior solar technology in a growing industry with sales that will take off … someday -- or so they want you to believe.
But investors read through the lines at Evergreen long ago when the company decided to make a move to China. And last quarter sales fell 60.4%, operating loss was $46.2 million, and the company had just $33 million in cash on April 30th. When management says "it will need to secure additional sources of cash sooner than expected," I'm wondering who's going to provide it.
Energy Conversion Devices is another solar company with technology that had high hopes. But a story similar to Evergreen is playing out, with revenue down 70%, a loss of more than three times its market cap last quarter -- and its CEO resigned. If any of these three can survive, this might be it because Energy Conversion Devices still has $52.7 million in cash and a relatively minimal operating cash burn in the last nine months. But $228.8 million in debt hangs over the company like a tornado ready to strike -- and with pressure hitting even the best companies in the solar sector, I wouldn't take a chance on this stock.
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