Wednesday, April 11, 2012

Capital Structure Table for A123 (AONE) Shows Big Disparity in Market-Implied Enterprise Valuations

This is roughly what the cap table looked like according to the 10-K (for the period ended 12/31/11).


Face Value Market Value
Cash -186,000 -186,000
Revolving Credit Lines 38,000 38,000
EV through Senior Debt -148,000 -148,000
Convertible Notes 140,000 43,400
EV through Notes -8,000 -104,600
Common Stock 142,454 142,454
EV through Common 134,454 37,854

Notice the huge disparity between the enterprise value implied by the convertible notes and what is implied by the common stock. Buyers of the notes create the company at a negative valuation and buyers of the stock pay an enterprise valuation that is around $240 million higher.

The one hazard of this cap table is that the balance sheet we have is now over three months out of date and does not reflect any subsequent cash burn or equity issuance since the beginning of the year. We know that there was one share issuance:
"In January 2012, we completed a registered direct offering of 12,500,000 units at a negotiated price of $2.034 per unit, with each unit consisting of (i) one share of our common stock and (ii) one warrant to purchase a share of our common stock for net proceeds of approximately $23.5 million."
So I have another cap table that tries to take this transaction into account:


Face Value Market Value
Cash -209,500 -209,500
Revolving Credit Lines 38,000 38,000
EV through Senior Debt -171,500 -171,500
Convertible Notes 140,000 43,400
EV through Notes -31,500 -128,100
Common Stock 154,579 154,579
EV through Common 123,079 26,479

So, with the new share issuance, the gap between the note-EV and the stock-EV is a bit higher actually: $250 million!

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