In my Cleantech Outlook for 2009, I highlighted A123 Systems as a top company to watch. The energy storage firm had filed a registration statement with the SEC, signifying that it was prepping for an initial public offering in the not-too-distant future.
Things were dicey at first, with the firm getting passed over by General Motors and its Chevy Volt plans. April, however, brought a key win with Chrysler for a line of electric-drive vehicles. A123 subsequently had no trouble raising $69 million from investors including General Electric (NYSE:GE), ConocoPhillips (NYSE:COP), and Qualcomm (NASDAQ:QCOM).
On the grid storage side of the business, A123 has gone on to garner further interest from firms like Southern California Edison, which is looking to pursue a pair of smart grid projects with a group including Cisco Systems (NASDAQ:CSCO), IBM (NYSE:IBM), and SunPower (NASDAQ:SPWRA) (NASDAQ:SPWRB).
A123's next hurdle was landing a loan guarantee from the Department of Energy, but the company's selection to build a new plant in Michigan seemed like a no-brainer to me. The firm won a $249 million grant in August. Having been given the government green light, and a slew of state incentives to boot, A123's expansion is moving forward. Hence the proposed IPO under the Nasdaq ticker "AONE," set for later this week.
The buzz is clearly building -- A123's estimated initial offering price was today increased from a range of $8 to $9.50 to a heartier $10 to $11.50. Let's take a look under the hood before that first day of trading really gets everyone's motor running.
Since it commercialized its first battery products in 2006, A123 has generated $154 million in product revenue. If you include R&D revenue, the total jumps to $188 million. Nearly 23% of that total revenue figure came in the first six months of this year, which conveys the heady growth being generated by this battery biz.
Adjusted for the expected offering of 25 million shares at a midpoint price of $10.75, here's what A123's core stats will look like:
|
Share Structure and Capitalization |
Numbers |
|---|---|
|
Shares Outstanding |
96.8 million |
|
Market Capitalization |
$1,040.8 million |
|
Cash and Equivalents |
$362.6 million |
|
Debt |
$16.2 million |
|
Enterprise Value |
$694.4 million |
|
Book Value |
$419.9 million |
Data from company filings.
A123 thus enters the public stage priced at more than twice book value, which is not unreasonable for a growth issue. The resulting enterprise value, while quite a bit lower than market cap due to the fat net cash pile, is still quite high relative to sales. Even taking lifetime total sales, we're looking at a ratio of 3.7:1.
To be remotely interested in A123 as an investment, I would need to see a clear path to several hundred million dollars in annual product revenue over the next, say, two to three years. If you're interested, I'm more than willing to explore that possibility in a subsequent article.
