Battery Maker To Test Waters With A 'Clean Technology' Stock Offering

A123Systems, a venture-capital-backed maker of lithium-ion batteries, has filed for a $175 million initial public offering (IPO) of stock on the NASDAQ stock exchange.

A123Systems was founded in 2001 as a spin-off from MIT. The company claims that its lithium iron phosphate cathode technology yields batteries that are safer and more durable than those currently used to power laptops and cell phones.

The company, based in Watertown, Mass., says in a filing with the Securities & Exchange Commission that it is targeting batteries for hybrid and all-electric vehicles, a market it estimates will grow to $5 billion by 2012. A123Systems and rival Compact Power are both working with General Motors on parallel projects to develop a battery for the Chevy Volt. A123Systems also has a contract with Norwegian electric car manufacturer Think.

New battery technologies are popular with investors, and there are a number of competing approaches for vehicle applications, according to Michael Holman of Lux Research, a technology adviser for corporations. "There is a shift to the new lithium batteries, but it could be that we'll have different chemistries depending on the needed performance characteristics," he says.

Investors in A123Systems include General Electric and venture firm Sequoia Capital. So far, the majority of the company's revenue comes from making cordless power-tool batteries for Black & Decker. In the second quarter of 2008, A123Systems recorded revenues of $10.3 million and a net loss of close to $14 million.

Consultant Richard T. Stuebi of NextWave Energy says the filing shows the strength of the so-called clean technology sector during a quiet IPO season. "It's the one segment of the economy with strong fundamentals. Market demand for new clean-energy technology will be enormous," he says.