IPO Strategy: Perfect timing for A123
Today's Financial News - Posted September 24, 2009
This is schedule to be the busiest week for IPOs since 2007. At least for A123 (NASDAQ:AONE), the timing could not be any better. The company is going public at the perfect time.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): The timing could not be much better. With the cresting at the top of unsustainable territory and the “green revolution” hype at levels never previously experienced, there is no better opportunity to take a speculative battery maker into the world of publicly traded securities.
Thanks to the current market environment, A123 (NASDAQ:AONE) has the opportunity to maximize the proceeds of every share it puts on the market.
It is a good thing it is making the move now, because another shot like this may not come around anytime soon.
The company, a spin-off based on technology devised at the Massachusetts Institute of Technology, boasts Nanophosphate technology. It uses nanoscale materials to produce high-power lithium ion batteries – the kind that may be in high demand as the electric-vehicle industry spreads its roots.
Take advantage of the situation
Today’s the first day the general public has the opportunity to get its investing hands on the company’s innovative technology.
The IPO was supposed to unleash 25.7 million shares at a price ranging from $10 to $11.50.
But management wisely asked why waste a grand opportunity?
With the market at the peak of its “hypeness,” the company decided to boost its initial offering to 28.2 million shares and charge even more for the chance to get in on the action. Shares are now being sold to the public for $13.50 each.
In all, the company expects to raise about $380 million. The cash infusion will add to the nearly $250 million the company received last week thanks to a grant from Uncle Sam.
With over half a billion bucks in its pocket, A123 is well capitalized and is in a good position to take advantage of a growing market. The big question, however, is will the market continue to expand or will another technology take hold of the market?
As the world’s automakers strive to find the balance between affordability and high-efficiency, there is an incredible array of technology to choose from, ranging from all-electric models to hydrogen to natural-gas fired motors.
Plenty of variables
A123 will likely be a long-term leader if the markets decide on lithium ion technology sometime in the not-so-distant future. If not, it could burn through its newfound pile of cash in no time.
In 2009, the company’s losses surged to $40.7 million over the previous year’s loss of $33 million. During the same time, however, revenues double to $22 million.
If you are looking to become one of the company’s first investors, you have to ask yourself one very important question.
Do you believe lithium ion batteries are going to have a significant role in the auto industry’s future.
While my vote is no, there is a growing contingency of analysts that disagree.
A123 is a speculative buy and today’s prices are going to look high in just a few weeks. If you want to get in on the action, your best shot at gains involves waiting for the hype to cool off a bit and buy anywhere near the original IPO range.
The only folks getting rich at today’s prices are the company insiders unloading their positions and the folks lucky enough to underwrite the sale.
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