Disclosure on Friday by A123 Systems that it has just “four to five months of cash to support its ongoing operation” was not actually news, but investors were spooked just the same when they saw it written on a U.S. Securities and Exchange Commission filing.
The battery maker founded as a start-up from research begun at the Massachusetts Institutive of Technology in 2001 saw its already declining stock take another 11-percent dive on Friday.
A123 expects to receive $9 million from institutional investors and to receive another $30 million after satisfying conditions related to its cash on hand, but it’s a far cry from its IPO days in 2009 when it received $378 million and its stock spiked 50 percent within days after launching on Nasdaq.
The company also accepted a $249 million grant from the U.S. Energy Department and – while stopping short of outright gloating – some are watching to see whether this will be another failure for the Obama administration.
Since the bankruptcy at solar panel maker Solyndra, federal purse strings have been pulled tight for green energy money in light of scorching criticism, especially from Republicans, for the government taking chances on admittedly high-risk ventures.
A123 Systems was especially hurt by a $67 million expense this year from a recall of batteries for the Fisker Karma plug-in hybrid following a breakdown during testing of one by Consumer Reports.
The jury is still very much out, as A123 has made significant progress, is still earning revenues – although it said it would make its quarterly gross profit margins next year instead of the end of this year – and A123 has supply deals with BMW, GM, SAIC Motor Corp. of China, and Tata Motors of India, among others.
It has said it is pursuing “other strategic alternatives,” and citing growth in its commercial transportation and grid operations, it said earlier this month it would hire 400 more people.
But with its stock price declining, investors putting “hold” recommendations on it, and cash running out, the pressure is definitely on.