The Ener1 Situation is Exactly Why We Suck

Charles Gassenheimer & the Gang:  Political Victims?

Charles Gassenheimer & the Gang: Political Victims?

I haven’t made many recommendations for clients in alternative energy stocks because a lot of the names that look commercially viable just seem too far away from profitability or are subject to drastic margin erosion (solar stocks, anyone?). I guess I’d rather be late but at least be involved in something proven.

I read about Ener1 (HEV), a New York City and Indiana-based company that may be our best hope for American-made electric cars, for the first time today in Barron’s.

When I read about the headwinds facing this American company with tremendous promise, I became nauseated with the political hand-wringing that seems to come with the territory these days.

The conundrum over Ener1 is as follows:

The company has a shot at a $2 billion plus market opportunity to build advanced batteries for hybrid electric vehicles, many of which will be engineered and assembled here in the U.S. if all goes according to plan.

They are in the running for almost $500 million of government development money under Obama‘s green initiative/ stimulus plan.

The company is being jerked around because a lot of the stock ownership is controlled by a pair of Russian oligarchs, who came up with the cash to save the company in its treacherous early development stage.

This is the kind of nonsense that goes a long way toward explaining why we don’t have a manufacturing and industrial base here in the U.S. anymore, why engineers and scientists are rockin’ and rollin’ overseas while we throw money and incentives at other industries (like bailing out finance companies).

When you think about the trillions going to f@#$ed up insurance companies and investment banks and then you hear about a potentially world-altering step forward in American technology that’s having trouble getting financed, it makes you want to pull your hair out of your head.

If this company can design and build, domestically, a product that helps with the environment and alleviates some of our dependence on Middle Eastern fossil fuels, why is it’s grant still stuck in committee or in a due diligence process? Because it has passive shareholders in Russia? As though we didn’t recruit Nazi rocket scientists and Japanese war profiteers after WWII.

Give me a break. If these guys have something promising, give them the money! Divert a half of 1% of the TARP funds, that by the way, have not demonstrably done anything to juice lending, and let’s finance some homegrown industrial activity that could benefit all of us.

According to Barron’s, the company has made the first cut of those vying for a total of $2 billion under the plan, from 75 companies to 25.  I can only hope that the deciders judge Ener1’s proposal on its merits, not the makeup of it’s shareholder base.

Full Story:  Powering Up…Or Down (Barron’s)

Full Disclosure:  I have no positions in HEV and do not plan to trade the stock for customers in the near future.  Further, I do not use this blog to make financial recommendations to anyone, so be sure to check out the Terms & Conditions page before acting on anything you read here.

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  1. Sean commented on Mar 23

    Not to say that I don’t agree with you on this being a better use of bailout money…but if they have so much potential, why are they are having a tough time raising money privately and relying on government vc? Seems to be that if the investment prospects were good, attracting money would not be an issue.

    This goes to the heart of what’s wrong with America…people are asking for handouts left, right and center. What happened to old fashioned capitalism and the notion of survival of the fittest?

  2. Sean commented on Mar 23

    Not to say that I don’t agree with you on this being a better use of bailout money…but if they have so much potential, why are they are having a tough time raising money privately and relying on government vc? Seems to be that if the investment prospects were good, attracting money would not be an issue.

    This goes to the heart of what’s wrong with America…people are asking for handouts left, right and center. What happened to old fashioned capitalism and the notion of survival of the fittest?

  3. Sean commented on Mar 23

    Not to say that I don’t agree with you on this being a better use of bailout money…but if they have so much potential, why are they are having a tough time raising money privately and relying on government vc? Seems to be that if the investment prospects were good, attracting money would not be an issue.

    This goes to the heart of what’s wrong with America…people are asking for handouts left, right and center. What happened to old fashioned capitalism and the notion of survival of the fittest?

  4. questioning commented on Mar 31

    You really need to look at Ener1’s history and market value before you get too enthusiastic. It’s currently valued at north of half a billion $. The company has very little cash, a book value of less than 10% of its market cap and essentially no sales.
    They can’t get private money because they have burned through almost $300 million of it already and have very little to show for it. Compare it’s situation to virtually every other start-up in the AE space and you’ll see why it’s not a problem of the government not funding good development, it’s the problem of the government not funding stock plays that benefit a few people, especially those who don’t live in the US.
    If you look at Ener1’s history (from its days as Boca modems up through car batteries, nano-tech, power grid batteries and now defense, it always has “the next big idea”, but none of those ever seem to become commercially viable. Meanwhile, a few million in stock purchases move the price by tens and sometimes a hundred million dollars in valuation.
    It’s one thing to help create an industry, it’s another to enrich a few shareholders. Personally, I think there are far better ways of deploying far less cash to get EVs going.

  5. questioning commented on Mar 31

    You really need to look at Ener1’s history and market value before you get too enthusiastic. It’s currently valued at north of half a billion $. The company has very little cash, a book value of less than 10% of its market cap and essentially no sales.
    They can’t get private money because they have burned through almost $300 million of it already and have very little to show for it. Compare it’s situation to virtually every other start-up in the AE space and you’ll see why it’s not a problem of the government not funding good development, it’s the problem of the government not funding stock plays that benefit a few people, especially those who don’t live in the US.
    If you look at Ener1’s history (from its days as Boca modems up through car batteries, nano-tech, power grid batteries and now defense, it always has “the next big idea”, but none of those ever seem to become commercially viable. Meanwhile, a few million in stock purchases move the price by tens and sometimes a hundred million dollars in valuation.
    It’s one thing to help create an industry, it’s another to enrich a few shareholders. Personally, I think there are far better ways of deploying far less cash to get EVs going.

  6. questioning commented on Mar 31

    You really need to look at Ener1’s history and market value before you get too enthusiastic. It’s currently valued at north of half a billion $. The company has very little cash, a book value of less than 10% of its market cap and essentially no sales.
    They can’t get private money because they have burned through almost $300 million of it already and have very little to show for it. Compare it’s situation to virtually every other start-up in the AE space and you’ll see why it’s not a problem of the government not funding good development, it’s the problem of the government not funding stock plays that benefit a few people, especially those who don’t live in the US.
    If you look at Ener1’s history (from its days as Boca modems up through car batteries, nano-tech, power grid batteries and now defense, it always has “the next big idea”, but none of those ever seem to become commercially viable. Meanwhile, a few million in stock purchases move the price by tens and sometimes a hundred million dollars in valuation.
    It’s one thing to help create an industry, it’s another to enrich a few shareholders. Personally, I think there are far better ways of deploying far less cash to get EVs going.