A123 Falters on Secondary Offering

Advanced battery maker A123 Systems Inc. (NASDAQ: AONE) said this morning that it will raise about $39 million through a sale of shares and warrants to institutional investors combined with the release of restricted cash.

The stock sale includes about 7.7 million shares priced at $1.30/share and an unspecified number of warrants. The company expects net proceeds of about $9 million from the stock sale. The release of restricted cash totaling $30 million follows the company’s having met certain conditions related to senior convertible notes.

In early June, A123 filed a “going concern” letter with the SEC, and two weeks later announced a new battery technology that bumped up the stock price by about 50%. The company has also received a $249 million grant from the Department of Energy, of which about $120 million remains available. A123 also anticipates tax credits from the state of Michigan totaling $100 million that are scheduled to start in the second half of next year.

That’s a total of about $259 million, far short of the $400 million a Wunderlich analyst said the company would need to get through the next 18 months. A123 expects to show positive gross margins and positive adjusted operating profits in 2013. But that probably won’t be enough to make up the difference. As a “going concern”, A123 still faces a lot of difficulties.

Shares are down -10% in the early afternoon today, at $1.17 in a 52-week range of $0.82-$5.91.

Paul Ausick