It is becoming increasingly clear that stock market speculators are going to be treating “clean” (green) tech as the next internet. Parallel to what was seen in the late 90s, a very true thesis (the internet will change the world) will be taken to extremes. Back then when a company announced a website launch, stocks would rush up 10-15% on the open. It sounds silly but we are seeing the same things now – lately some solar stocks are annoucning US plants and that alone pushed them up 10% on a session. For an industry that has been suffering from wicked over production, no less. But humans are humans – the behavior never changes; just change the thesis/theme/bubble/hype. Heck we even had clean tech stocks back in 99, Ballard Power (BLDP) anyone? Fuel Cell (FCEL)? Plug Power (PLUG)? I was assured (without a doubt!) by “those in the know” a decade ago that “first mover advantage” would have these 3 as the future kings of alternative / battery energy. My gosh, I was even offered white papers to prove the “can’t miss” nature. Now I see 3 penny stocks – feel free to peruse the Yahoo message boards of those names, and go back a decade and you’ll see the same confidence you see now in today’s crop of “can’t miss”.
Hence, this action can be played until the music stops – just be careful of buying into the hoopla behind the greater theme. Yes, just as the thesis of the internet as a huge sea change was correct, “green” tech will be a game changer but sorry, just as in 1999 there won’t be 100s of winners in this space… just as there were very few [eventual] winners from the Internet revolution. (Lycos? Excite? AtHome Networks? Exodus? I have about 100 more….) [insert cursory “but it’s different this time!”] There will be survivors and eventual winners [Yahoo, Amazon, Ebay] – but pretending to know who they are, this far in advance, is pretentious. Just as then, I expect many of the companies being talked up by the speculator set, to be out of business or trading for $1.12 when we look back in 2019. [I say this with a twinkle in my eye as the “merger of the century” between AOL and Time Warner – just spit AOL back on the public market as an IPO… so funny]
So with all that said, let us speculate….
A123 Systems (AONE) [don’t dare look at the valuation] was one of the year’s most hyped IPO’s. [Sep 24, 2009: A123 Systems – Hope or Hype?] Thus far it has been a disaster for anyone who did not sell in the first week, but after crumbling through late November, it’s turned back around of late. Today’s news of a joint venture with (drumroll) a Chinese company is all anyone needs to hear – time to rocket that stock, and lo and behold it just jumped over the 50 day moving average.
A123 Systems Inc. and General Motors Co. partner SAIC Motor Corp. said Thursday they plan a joint venture in China to supply batteries for electric and hybrid vehicles. State-owned SAIC will hold a 51 percent stake in the joint venture, which will focus on developing battery systems for electric and hybrid cars, trucks and buses, A123 said in a statement. (as always, there must be a joint venture to have access to China; in return – they will eventually get your technology. In 10+ years – they won’t need you)
It gave no financial details. (no need for financial details, just run the stock up)
The venture would make complete vehicle traction battery systems for hybrid electric and pure electric passenger vehicles and heavy-duty truck and bus applications.
So who will be the big winner down the road in China? The US? A123? China BAK Battery (CBAK)? BYD (BYDDF) – backed by Warren Buffet? Any number of smaller, or private companies I have never heard of? Who knows. Let’s just not fall for the “market opportunity is so huge, countless winners will emerge”. I’ve heard that in just about every emerging technology – I have yet to see any industry where countless companies thrive over the long run.
But again – don’t worry about the details (wouldn’t it be funny if A123 agreed to take only 2% of future profits of the JV?) just buy, buy buy. The tulips are back in their next iteration.
Disclosure: No position