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The road to an initial public offering has been a long haul for startup A123Systems — it initially filed to go public just over a year ago, shortly before stock markets began to plummet. This morning, the Massachusetts-based lithium-ion battery maker has finally set the terms for its IPO in a new filing with the SEC, proposing to sell 25 million common shares at $8 to $9.50 per share. Individual shareholders expect to sell an additional 680,500 shares.
While A123 has yet to turn a profit, the company has been in the money this summer, snagging a whopping $249 million grant from the Department of Energy last month to help it carry out a plan for setting up commercial manufacturing in the United States. The company has raised more than $350 million from private investors, and A123’s offering (set by underwriters including Morgan Stanley and Goldman Sachs) would raise between $200 million and $237.5 million in the IPO, up from the $175 million it initially filed to raise in 2008.
That’s not much of an uptick, considering how much has changed for A123 since its initial filing (in addition to winning the DOE grant, the company secured a supply deal with Chrysler), and also how much capital A123 is going to need for its planned expansion. Despite hefty boosts from the U.S. and Michigan governments, the company doesn’t expect its U.S. buildout to come cheaply.
Under the battery grant initiative, A123 has noted it “will be required to spend up to $1 of our own funds for every incentive dollar we receive.” Under a second DOE program — the Advanced Technology Vehicles Manufacturing Initiative — through which A123 hopes to secure $235 million in direct loans, the company would have to spend $1 of its own funds for every $4 it borrows because of cost sharing requirements.
As panelists at the recent AlwaysOn Summit at Stanford noted, “going public is a huge branding event” that does a lot to raise a startup’s profile. Having bagged the DOE grant in a program that heavily favors larger, more established corporations ahead of startups, the eight-year-old company is not exactly under the radar. But A123 still remains a small fish in a pond that includes Johnson Controls, LG Chem, Delphi and Saft.
The visibility that A123 has gained, and disclosures it’s been required to provide as part of its move toward an IPO, may have helped its case with the DOE. At the same time, last month’s $249 million vote of confidence from the government may have provided one last push for A123 to go through with its public offering.
A123’s IPO will be one of the only venture backed cleantech startups to go public after the recent market deep freeze, and could serve to thaw the public markets for other cleantech startups if it gets a good response — or even deliver the blockbuster IPO year that investor Steve Westly has forecast.