This morning A123 Systems filed another registration statement amendment for its planned IPO. The amendment specifies a preliminary price range of $8.00 to $9.50 and a preliminary offering size of 25 million shares (28.85 million shares with over-allotment option). Amendments like today’s filing occur during the late stages of an IPO and it’s not unusual to see the price range or offering size increase in later filings.
Both of the preliminary values are about half of what I expected. The price range surprises me because of its rough parity with the $9.20 per share price A123 received in its last private placement. The offering size surprises me because A123 needs to raise significant working capital; needs to raise $250 million in matching funds for the ARRA battery grants it was awarded last month; and needs to raise up to $60 million in matching funds for DOE guaranteed loans it expects to qualify for. If the A123 IPO goes off in the preliminary ranges, it will have an initial market capitalization of $800 to $950 million.
I have to assume that the initial share price and offering size estimates were fixed at conservative levels because of weak conditions in the IPO market over the last year and uncertain current conditions in the broader market. I sincerely hope that the road show surpasses everyone’s expectations. I’ve been waiting for the A123 IPO since the summer of 2008 and believe that a successful offering will draw attention to the energy storage sector in a way that no other event can.
Storage sector investors who want to better understand the impact a significant IPO can have on a sector should read Zachary Scheidt’s recent Seeking Alpha article, The Stage is Set for an IPO Rebound. Another worthwhile recent article from Forbes.com that discusses the potential impact of the A123 IPO on the energy storage sector is “Battery IPO Could Recharge New Issue Market.”