Here we go again: Another battery maker is crushing shareholder hopes by announcing a dilutive stock offering to fund its ongoing cash bonfire.
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.