Electric Car Battery Stock Headed for Bankruptcy
Is A123 Systems (NASDAQ:AONE) Going to Zero?
There was so much enthusiasm when high-performance battery manufacturer A123 Systems (NASDAQ:AONE) came on the scene.
The promise of an advanced battery manufacturing facility pumping out batteries for next-generation electric cars while providing jobs for US workers was a bold one, and one that a lot of folks cheered. But certain realities rapidly turned that promise into what now looks like another bankruptcy in the alternative energy space.
Yesterday A123 put out the following statement. . .
“The company may not have sufficient cash to fund operations and may need to seek the protections provided under the U.S. Bankruptcy Code. No assurance can be given that the company will be able to avoid restructuring, reorganization, or a bankruptcy filing.”
Now despite the fact that we never wished anything but success for the company, we've been warning investors all year about this one, even when a handful of analysts got all giddy when the stock popped back in June.
Here's what I wrote back then. . .
Yesterday, A123 Systems (NASDAQ:AONE) shot up more than 50 percent after announcing it had developed an improved lithium-ion cell that can cut costs of electric cars.
While I've always been a big supporter of this company (wishing them the best), as an investor, I can't help but to wonder what happened yesterday.
Just a couple of months ago, the company began replacing defective battery packs at a cost of $51.6 million. This helped the company report a record loss of $125 million for Q1, 2012. The company even had to issue a “going concern” statement.
Last month, when shares closed below $0.90 the company had long-term debt of $161 million compared to a market valuation of $129.3 million. To put that in perspective, when the company went public, it debuted at $13.50.
Now don't get me wrong. The company's announcement of its technological breakthrough should not go unnoticed. But neither should the fact that this company is still dealing with $51 million in battery replacements, foreign competitors that continue to maintain a significant manufacturing cost advantage, and of course, bankruptcy concerns.
Sure, technological breakthroughs are great. They're important, and they've been produced by plenty of other companies that no longer exist today. That's the reality. Personally, I do hope A123 comes out on top when all is said and done. But it's going to be a long, tough ride. And I just don't see any rational justification for a 50% pop on an announcement of a technological breakthrough from a company that's barely treading water right now. In fact, I honestly wouldn't be surprised if the company went belly up by the end of the year. I hope I'm wrong on that, but it doesn't look good.
Unfortunately, I may not have been wrong when I wrote those words.
And what really makes this sting is that A123 landed a $249 million federal grant to build a U.S. factory back in 2009. Rest assured, you'll be hearing plenty about that over the next few days. And rightly so. After all, these are your tax dollars we're talking about here. And you have every right to know how they've been spent.
Of course, you'll probably be hearing all about it tonight during the second presidential debate, too. Romney campaign strategists must be doing back flips right now.
I just hope the analysis following the debate doesn't mutate into yet another attack on electric cars. Which, as I've said a thousand times before, serve as one of the many tools we can use to end our reliance on OPEC.
But I'm sure it will. Because nowadays, it's more important to dive into the pool of partisan buffoonery than it is to embrace positive contributions to our national security, our environment and our nation's long-term economic sustainability.
And so it goes. . .