A123 IPO priced to charge car battery market A123 Systems, closely-watched as one of just a few American electric car battery makers, sees public offering price at $13.50 a share -- well above expected range.
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NEW YORK (CNNMoney.com) -- A123 Systems, one of just a handful of U.S.-based makers of batteries for electric cars, far exceeded expectations when its initial public offering priced Wednesday after the bell.
The offering was priced at $13.50 a share, well above the originally proposed range, and raised $380 million, according to a Securities and Exchange Commission filing.
Trading in the firm's shares will begin Thursday morning on Nasdaq under the ticker symbol AONE (AONE).
Interest in the company is running high. "I heard it was standing room only at many of the presentations," before money managers, said one person familiar with the firm.
The company is closely watched for several reasons.
For starters, the Massachusetts-based firm, an outgrowth of the research labs at the Massachusetts Institute of Technology, is one of just a few American companies that are competing with much larger Asian rivals for the potentially lucrative hybrid and plug-in electric car battery market.
Many analysts believe electric cars will begin replacing internal combustion engines, refueling with nuclear or renewable-generated electricity as the world becomes more concerned with global warming.
As the battery is the most expensive component in an electric car, the thinking goes that whoever controls the battery market may ultimately control the auto industry.
0:00 /4:49GM: Battery innovation is key A123 also has some high profile backers. General Electric (GE, Fortune 500) and Motorola (MOT, Fortune 500) were early investors in the company. Analysts also give the company credit for developing a very competitive technology that relied on the nanotechnology research from MIT.
And A123 recently won a $250 million grant from the federal government to build a production facility outside Detroit - the second largest grant awarded in a recent $2.4 billion round of stimulus-related funding.
The public offering, planned over a year ago but delayed after the market meltdown, comes as the stock market rebound continues and public offerings are again in fashion. This week there are eight companies slated to go public, the busiest week since 2007.
The firms' underwriters, Goldman Sachs and Morgan Stanley, have taken notice in this interest. On Tuesday, they raised the offering price from $8-$9.50 a share to $10-$11.50.
But just because A123 is generating buzz doesn't mean it's a good investment.
Namely, it has yet to turn a profit, although that's not uncommon for tech startups. The firm lost over $40 million in the first half of 2009 on sales of just under $43 million, according to documents filed with the Securities and Exchange Commission. In 2008, the company lost over $80 million on sales of $68.5 million.
While many analysts see electric cars as the next dominant transportation technology, that future is by no means guaranteed. Natural gas, advanced biofuels, hydrogen, super-efficient gasoline engines or even a mix of technologies could ultimately prevail.
While A123 has working relationships with many firms -- including Chrysler, Daimler and General Motors -- it's not a major supplier to any of them as of yet.
Plus, A123 is a small player competing against large, mostly Asian firms with decades of experience in the battery business thanks to their proficiency in making things like cell phones and laptops.
Panasonic (PC) is in a joint venture with Toyota (TM), Sanyo supplies Volkswagen and Honda (HMC), and NEC is working with Nissan, according to research firm ThinkEquity.
The American firm Johnson Controls (JCI, Fortune 500) has partnered with French-based Saft to supply Ford (F, Fortune 500), Mercedes and BMW.
General Motors recently chose a subsidiary of Korean firm LG as its partner on the much hyped plug-in Chevy Volt, although GM is thought to be still working with A123 in some capacity and left the door open for a possible deal with A123 in the future.
A123Systems Selected for Award Negotiations for $249M Grant from U.S. Department of Energy to Build Advanced Battery Production Facilities in the United States
April 14, 2009 A123Systems Awarded $100 Million in Refundable Tax Credits from Michigan Economic Development Corporation
