First, as a big stakeholder in AONE Wanxiang wants to protect their investment.
Second, if the deal is not blocked, I expect Wanxiang will make the whole investment.
Weiding Lu, CEO of Wanxiang Group, earlier said "A123 offers industry-leading technology for vehicle electrification and grid-scale energy storage, as well as strong manufacturing and systems engineering capabilities in Michigan and Massachusetts. We think this creates important synergies with Wanxiang, which has been involved in this field for 12 years and has strong R&D and manufacturing capabilities in China, especially as we continue to expand on our strategy of investing in the automotive and cleantech industries in the U.S. We plan to build on the foundation A123 has established in the U.S. and help expand the company’s capabilities both domestically and internationally, which we believe would create long-term value to the customers, investors and other stakeholders of both companies".
Wanxiang has an incentive to buy the stock on the open market, rather than exercising their conversion option or warrants, which should provide price support.
Wanxiang earlier offered 475 million. Reading the details of the release, $75 million of the investment is to be a short term bridge loan, which does not involve the purchase of A123 stock. The rest is to consist of $200 million in convertible notes (which can become stock) and $175 million which might be invested with the exercise of warrants. An exercise of all these warrants and the full conversion of the convertible notes would result in Wanxaing controlling 80% of the company, or about 680 million shares, based on the 170 million shares A123 had outstanding at the end of July. Doing the math, and assuming that the initial $75 million bridge loan is not used to purchase shares, that’s 55 cents a share.
In august Wanxiang had indicated its interest in buying A123 at $0.55 a share, which should put a nice floor under the share price, along with a lot of potential upside as the deal gives A123 new financial stability to execute on existing opportunities and tackle new opportunities in China.
Don't you think the gap between 3 months ago (0.55 a share) and today (0.03 a share) is too big?
Do the math and your DD.
AI
