Erin Ailworth wonderfully details how A123 systems went from green darling to declaring bankruptcy (Globe membership required) in just three years.
In 2009, as Governor Deval Patrick joined chief executive David Vieau to tour the burgeoning battery maker, A123 raised $380 million as part of its IPO while securing another $400 million more in grants, loans, and tax incentives.
It was all that money, Ailworth reports, that did A123 in, as the company moved to secure new markets and customers before even fully developing its product.
One GM executive told an early investor, “I’ve seen the future, and this is it.”
Wide-eyed investors, eager early customers and generous government grants all contributed, making the company’s initial offering look like it could be the start of a green IPO flurry. But even then, cooler heads noted that the company might not be a fundamentally safe bet.
”But for investors who remember the dot-com boom, there is one potentially troubling part of A123’s pricey public offering: The company’s proven track record of spending more than it makes,” wrote Keith Johnson for the Wall Street Journal’s Environmental Capital blog. “In the first half of 2009, A123 had sales of $43 million and a net loss of $41 million.”
Losing money wasn’t a deterrent for the state, either.
”Economic development officials in Michigan and Massachusetts were chasing the company, turning on the charm, and enticing A123 executives with incentives,” Ailworth reported. Similar courting occurred with Evergreen Solar, but the wooing went both ways.
As Scott Kirsner noted in 2009, A123 spent hundreds of thousands in lobbying the Department of Transportation, the Department of Energy, and the House and Senate. As Kirsner notes, some of his writing in those days was particularly prescient, particularly one quotation from Hemant Taneja, a venture capitalist at Cambridge-based General Catalyst Partners.
“I think you have to accept the fact that you’ll see some of these companies flame-out, and capital will be lost,” he told Kirsner at the time. “But you’ll also see some brilliant, big companies that will get built, and will be good for climate change and economic development. I just don’t see how else you can do it.”