But $9M stock offering called too little, too late
In a desperate attempt to return from the brink, embattled Waltham battery maker A123 Systems is preparing a significant stock offering that it hopes will raise about $9 million.
The cash-grab comes as the company faces three class-action lawsuits, each alleging executives withheld information from investors about a crisis caused by defective battery packs used in electric vehicles. The scandal led to a mass recall that cost the company at least $55 million.
The company said it hopes to sell 7.7 million shares of common stock for $1.30 a share, but that is significantly higher than at least one analyst’s recent target — and yesterday’s closing price.
Indeed, A123, which received a $5 million loan from Gov. Deval Patrick’s Clean Energy Center two years ago, made clear in its federal filings yesterday that it only has enough cash to support four or five more months of operations. The one-time “green energy” darling also landed $100 million in tax credits from Michigan to build a factory in Livonia, where President Obama stopped two years ago for a photo opp.
“According to our analysis (A123 Systems) will need $400 million more than it’s got to make it through the next 18 months, and even then it will not be enough,” Theodore O’Neill, an analyst at Wunderlich Securities, wrote in a scathing mid-June report. “We reiterate our ‘sell’ rating and our $.50 price target, which would be zero except that we believe the factory has some residual scrap value.”
A123, led by CEO David Vieau, declined comment yesterday beyond its written statement announcing the stock offering. The company also said it now has access to $30 million in cash because it met certain requirements for a line of credit.
In federal filings yesterday, A123 said it spends $18 million to $25 million per month on operations, so that new cash infusion could buy it another month or two of breathing room.
O’Neill’s report last month followed an announcement by A123 that it developed a new material to be used in lithium-ion batteries that some day might solve the heating and cooling problems that plague current batteries.
“The operative term is ‘some day’ because there is no product,” O’Neill wrote to investors. “According to channel checks we made ... new battery technologies are a dime a dozen, and it may take years to get into production and qualify with customers. Years are not what A123 has.”
Regulatory filings yesterday note that A123 stock is “highly volatile.”
“We expect it to continue to be volatile for the foreseeable future,” the company states, adding that from Sept. 24, 2009 through May 31, 2012, the stock traded at a height of $28.20 per share and a low of $0.82 per share. The stock tumbled 10 percent yesterday to close at $1.16.
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