Here we go again: Another battery maker is crushing shareholder hopes by announcing a dilutive stock offering to fund its ongoing cash bonfire.
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But we should have seen the latest blow from A123 Systems
If the deal goes off as planned, A123 will sell an extra 20.7 million shares and $143.75 million of debt, assuming underwriters exercise their options (as they usually do). If shares sell for $7 apiece, A123 would bring in roughly $288.75 million to fund operations and finish capital expenditures. To put that in context, A123 burned $128 million in operations alone during 2010.
The latest round of dilution would leave A123 with around $500 million in cash -- hopefully enough to drag the company into full-fledged operations. But with losses expected through 2011, you never know when A123 might have to go back to the well.
Short-sellers consider A123 Systems an easy target, shorting nearly 15% of shares. I’m not ready to follow suit, but I don’t see any catalyst for long investors in the near term. I have hope for A123 over the long haul, but I'll be sitting on the sidelines until I see some real progress toward profitable operations.
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