Raining checks

A123 is expected to go public this week in an initial stock offering worth about $200 million, by far the most important Massachusetts IPO of the year. It’s the stock market’s glitziest offering in a week that may turn out to be the busiest for IPOs since December 2007. Expect the deal to be priced tomorrow.

If A123 is a new name to your ear, you haven’t been paying attention to the hype over electric cars and hybrid autos. Many people believe A123’s lithium-ion technology is going to be a hit in the auto industry, though the company’s batteries are already used in consumer products such as power tools and have applications in electric power grids.

A123 originally filed its IPO paperwork in August last year. The stock market was already weak by that time, but it fell off a cliff soon after. The company’s IPO plans were put on the shelf, and it looked as though they could stay there a long while.

That was a serious problem because A123, for all its promise, was producing red ink by the barrel.

But money started to rain on A123 from many different directions. Affiliates of General Electric Co. decided to invest $30 million in the company last fall. Venture capital investors, who had been looking forward to the IPO and an investment exit strategy, were writing checks instead by the spring. They ponied up another $30 million in April and May, though half came again from GE.

Those investments turned out to be short money compared with the windfall ahead. A123 emerged as a big winner when the federal government handed out $2.4 billion in grants last month to encourage the development of electric and hybrid vehicles.

A123 secured $249 million in grants, among the most of any individual company. But the funding story gets even better.

The state of Michigan will pay A123 up to $100 million for a plant there. The company also says it has access to about $250 million in loans from a Department of Energy program.

Money problems? What money problems?

Of course, the real story is more complicated than that. The federal grants are a huge boost, but the company has to match the funds with its own money that it must spend developing its business.

Then there are the risks. The more business A123 conducts, the more money it seems to lose. The company generated $41 million in revenue in 2007 and lost $31 million that year. A123 reported $43 million of revenue in just the first six months of this year, but lost more than $40 million over that period.

A123 actually makes and sells batteries, but the company’s most closely watched products are still in development. The company has a contract with Chrysler, but it lost out to South Korea’s LG Chem for the high-profile business to power the planned Chevy Volt.

A123 has signed up an impressive list of corporate clients for development contracts, notes analyst Matt Therian, who follows IPO stocks for Renaissance Capital Corp. in Greenwich, Conn. But he questions how many of those relationships will eventually turn into real production business.

A123 is the kind of IPO the stock market doesn’t see much any more, a young company still losing big money chasing the promise of a new technology. The deal might have stalled on its own, but that deluge of money from private investors and government grants should make A123 popular out of the gate.

The Red Herring
■ Massachusetts Secretary of State William F. Galvin objects to the Securities and Exchange Commission’s plan to settle what’s left of Reserve Management’s $62 billion money market fund that “broke the buck’’ last year and left investors with assets worth less than $1 per share. Galvin told a federal judge yesterday he objected to SEC efforts to “claw back’’ money from investors who redeemed shares just before the fund ran into trouble.

■ Please join a host of celebrity chefs and me for the 2009 “Men of Boston Cook for Women’s Health’’ Thursday at the Codman Square Health Center in Dorchester. For tickets, go to menofboston.com or call 617-822-8194.

Steven Syre is a Globe columnist. He can be reached at syre@globe.com.