IPOs and Bankruptcies and Cleantech “Hot or Not”

Last night while watching Office reruns, I realized I’d been remiss, and a lot’s had been happening in the public equities end of the cleantech sector.  Not to mention yesterday’s billion dollar BK broiler announcement by the one-time Next Greatest Thing, Solyndra.

So, with my usual aplomb, I thought I’d simply peanut gallery what’s “Hot or Not” in cleantech.


Bled Out on the Operating Table

Solyndra – BK (and not the burger kind). Well, we wrote about it a lot, and nobody believes us.  But bad product is bad product, and high cost is high cost, regardless of how much money you throw at it.  So who’s going to calculate the impact on the DOE loan guarantee program’s projected loan losses? Not.

Evergreen Solar (NASDAQ:ESLR)  – :(  And it was such cool technology, too.  I’m very sorry to see this one go.  At one point some years back it was the savior deal of the sector.  But we are in a race to cost down or die. Not.


Filed, Not Yet Hell for Leather

Enphase – I’m very very interested in seeing these guys make it.   Lots of growth.  Very thin margins so far.  Product costs looks miserably high.  Need to cost down like a banshee running from the Bill Murray.  But you’ve got to love the category killer potential and how fast they’ve executed.  First microinverter guy to manufacturing maturity eats the others like oatmeal (sloppy but eaten nonetheless). Hot.

Silver Spring – Hmmmmmmmmh.  Home run potential, but what’s the term?  Very high beta?  These contracts are massive, far strung, very very tight margin.  They’ve shown they can get the growth.  But with long lead time sticky contracts, it’s about managing costs during slippage and change-orders well, and it’s a very competitive business.  One blown contract gives back all the profits on the last 8.  But, give kudos for getting this far and making it to be a real player.  Now we’ll see if you can execute. Hot.

Luca Technologies – Hello?  Are you serious?  I read this S-1 cover to cover.  I had my technologist read it and go find their patents.  We love this area.  The concept of microbes for in situ is old as can be, but very very interesting..  The challenge is always cost and performance (not really a new nutrient mix?).  How do you get the bugs, nutrients, whatever you’re doing, down the hole and into the formation far enough and cheap and effectively enough to make a difference.  But in the entire S-1 and website, there is not a single technology description, fact, proof point or ANYTHING that suggests they’ve actually cracked the real nut.  The few numbers they do mention are not even to the ho-hum level.  Did a real investment banker really sign up to this?  Who wrote this?  Their PR guy with a liberal arts studies degree?  Really?  This smacks of a “trust us I’m Jesus and daddy needs an exit” deal.  In reality, probably interesting, but still very very very very very very very early science project.   Not.


We have a whole collection of biofuels stocks to discuss now.

Solazyme (NASDAQ:SZYM) – half of its 52 week, less than a buck over its low. Not.

Kior (NASDAQ:KIOR) – Somebody correct me, but did the filings really indicate Khosla put money IN to this IPO?  And it got off at low end of the range even after that? From one of their filings: “In conjunction with the Issuer’s IPO, an entity affiliated with the Reporting Persons purchased 1,250,000 shares of Class A common stock, resulting in an increase in beneficial ownership by the Reporting Persons by that amount. The
purchase was made at the initial public offering price of $15.00 per share, for an aggregate purchase price of $18,750,000. The source of funds used to purchase the shares of Class A common stock was Khosla’s personal assets.” At least it’s money where it’s mouth is.  Not.

Amyris (NASDAQ:AMRS) – 58% of its 52 week high, 20% over it’s low. Not.

Gevo (NASDAQ:GEVO) – 40% of its 52 week high, c. 20% off it’s low. Not.

Codexis (NASDAQ:CDXS) – 55% of its 52 week high, c. 20% off it’s lows. Not.

I’d comment on the fundamentals of each one, but I don’t want you to think I’m depressed.  Oh, by the way.  Did I ever tell you the story about the cleantech sector’s magically changing cellulosic biofuels business plans to “cellulosic bio-anything-but-fuels” plans as people finally woke up and realized how tough using lousy feedstocks and high cost processes in a commodities market actually is.  Of course, careful you don’t change from targeting fuels to making feedstock for dirt cheap who would want to be in that business commodity chemicals or specialty chemicals with a global aggregate gross margin market less than your cash on balance sheet.

And a Few Tidbits

Advanced Energy (NASDAQ: AEIS) – I still really like this company.  Somebody’s going to own inverters.  And the numbers look very interesting.  Very. Need to dig deeper. Hot.

American Superconductor (NASDAQ:AMSC) – Ummm.  Do you believe their wind business ever recovers?  One customer.  Buying a competitor with one customer.  Both in China.  Customer doesn’t like single supplier risk where the supplier makes high margins?  What did you think was going to happen?  Ugly ugly story.  Very real possibility that they trade on a log curve to straight zero.  Some chance of sunshine, but I’d cancel the picnic. Not.

A123 (NASDAQ:AONE) – I really really really want this to work.  But what’s the path to profits?  Not feeling it. Not.

Tesla (NASDAQ:TSLA) –  “Don’t worry, the NEXT car will fix my company’s fundamental problems” – quote attributed to the Tesla CEO who replaces the next Tesla CEO. Not.

Active Power (NASDAQ: ACPW) – Hey, did anyone notice these guys are growing revenues AND margins?  A long haul, but keep it up!  Need careful consideration before I’d jump into flywheels, but someone deserves a ton of credit as coach of the year.  Hot.

Satcon (NASDAQ:SATC) – Hammered, but still a market leader.  Got to think about this one – it’s historically traded for more than it’s fundamentals justified, but with PV Powered and Xantrex snapped up, hard to imagine they stay independent for long. Hot.

SunPower (NASDAQ:SPWR)  – Wow.  Total. No guts no glory.  Highest cost producer, shall we call it the “performance queen”.  I do like this bet by Total, but it takes guts.  But when a market leader’s stock’s been hammered that far down somebody’s got to move and Total did . . .  Whether an individual investor can play is another story. Hot.

Ascent Solar (NASDAQ:ASTI) – Holy star solar batman!  These guys can sell ice to eskimos are have always been great R&D guys.  Still maybe the highest cost CIGS process known to astronauts.  I like these guys, but I’m not sure more cash fixes anything. Not.

Solon – What does “New US operational strategy” mean?  It means solar is a game of scale and execution.  Not.


Young Cleantech IPOs = Venture Paradise Found?

It struck me the other day that I may have been looking at the recent spate of cleantech IPOs backwards.  Perhaps instead of lamenting the dearth of profitable healthy companies going public on major exchanges  in our sector, what we should be considering is whether early and still risky IPOs mean cleantech venture capitalists are finally finding a capital path and exit model that works, akin to the IT and biotech venture models that delivered such terrific returns up until the internet crash.  And the question then is, can these IPOs continue, and perform and validate the broad strategy that our tech venture capital sector has been following in cleantech?

Our American institutional venture capital sector largely missed the cleantech AIM boom in Europe.  Missed the Carbon trading boom in Europe and Asia.  Missed the Chinese solar manufacturing boom.  And missed the corn ethanol boom in the US, the wind project developer boom in the US and Europe, and the sugar cane ethanol boom in Brazil.  Oh, and missed the shale gas boom in the US.  Each of which were tens to hundred billion + dollar booms. All the money in those sectors was made largely by investors and players outside the traditional venture arena – though some exceptions in each prove the rule.

Instead the American venture capital and tech sector eschewed what proved to be a huge number of highly profitable investment areas in cleantech as “not venturable bets”, and has poured c. $15 -$20 billion + into thin film /advanced solar, cellulosic biofuels, solar finance, smart grid, automotive/energy storage technology.  One cynical argument is that in a hubristic attempt to avoid the “low tech”, policy driven and capital intensive sectors in cleantech, our venture sector overreached into technology risk, and then once they found the policy risk and capital intensity waiting for them on the other side busily moving the bar, they started clamoring for M&A, IPOs, and government funding and policies to bail them out. In any case, the cleantech deals are hurting for a lot more cash and likely need early IPOs to make the sector viable long term, but the first generation of cleantech VCs have learned lots of lessons.

BUT, are we now on the cusp of a model capable of anchoring returns for these last few years of the 2nd and 3rd waves of cleantech venture capital investment anyway –  a model perhaps described as 1) raise larger funds, 2) take more concentration early in technology risk curves, 3) stack on capital fast 4) take heavy leverage with government dollars, 5) IPO early leaving money on the table in terms of tech boom style multiples, but leaving a lot of technology and scale up risk for the public markets.  Time will tell.

Critical to this model would be 1) the aftermarket performance of the the first wave of these IPOs, and 2) willingness of policy makers to continue to fund.  So a quick look at the Big 4 of US venture backed cleantech IPOs to date hopefully tells us something.  Excluding for this analysis earlier US cleantech powerhouse deals SunPower and First Solar, which came up a different financing paths and well before the policy and FIT booms that drove most of the first generation of solar profits.

A123 – Went IPO on the back of having neat batteries for EVs.  Still losing money.

Amyris –  Not sure what it went IPO on.  Still losing money.

Codexis – Went IPO on the back of a strong R&D partnership and contract with Shell.  Still losing money.

Tesla – Went IPO without the product it needs to breakeven built on the back of DOE money and car sex appeal. Still losing money.






Aftermarket performance, key to the actual returns of the LPs who usually aren’t out at the IPO and even more critical to willingness of the public markets to underwrite more deals, hasn’t been awful.  Three of the four doubled from the IPO price before peaking and giving back one to three quarters of value from their peak.  Two of them are still above listing, mean 90 day post IPO performance is a positive 27%, only one struggled to see a strong pop, and the mean performance to date since IPO price is+9%.

Of course, the largest, most mature, and earliest bellwhether, A123, has been on a long slow slide.  Meaning overall dollar weighted average performance would be a -6%.  And 90 day performance is only 3% with performance to date a -8% if calculated on the 1st day close not the IPO price, meaning it may be more underwriters managing issuance price than true aftermarket performance.  If benchmarked against the S&P 500, foreign cleantech IPOs and other non cleantech US IPOs it might not look so good.  But time will tell.

Will these first Big 4 hold out for solid returns, or slide like A123?  What portion of their businesses will get built and eventually become profitable?  Will they be able to raise more capital?  Will the next crop of rumored and planned cleantech venture backed IPO candidates from BrightSource to KiOR to Silver Spring to Opower to Bloom Energy make it through?  How much cash will they need before they do/what kinds of aggregate cash on cash returns multiples will we see, and will they too hold up when the public markets are asked to support billions of capital into dozens of these deals needed to anchor the cleantech venture sector?