BMW’s upcoming demo car, featuring the world’s first solid-state battery developed by Solid Power (SLDP), could re-ignite interest in SLDP’s currently undervalued stock. BMW is already testing Sample A-2 silicon-anode batteries shipped last November.
If the timeline holds, the next development stage will involve testing Sample B cells in a demo car, possibly next year. Earlier this year, SLDP’s CEO commented:
“We will continue our strong collaboration in 2024 with BMW and look forward to supporting them as they build the world’s first full-size demo sedan powered by Solid Power’s solid-state battery.”
Progress in Battery Development
Battery development companies like SLDP follow a standardized roadmap with distinct stages represented by Sample Sets: A, B, and C. Each stage typically involves an 18-month cycle of rigorous testing, feedback, and design refinement. SLDP’s progress is evident as shares are up 19% this year, outperforming the Russell 2000 (IWM) index, though still 80% down since beginning trading in 2021.
With a market cap of just $300 million, the company is priced as if it has already failed, trading at roughly a 40% discount to its tangible assets.
SLDP’s Share Price Decline
The 80% decline in SLDP’s share price might paint a picture of a company in distress, but this perception is far from accurate. As a development-stage company, SLDP’s progress hasn’t always been linear each quarter, but it has consistently advanced its battery program every year since going public in 2021, culminating in its Sample A-2 shipment last November.
The company became publicly traded in 2021 via a SPAC deal that capitalized on the post-pandemic market exuberance, securing over six years of operating and capital expenses.
Financial Overview
Thanks to the SPAC deal, SLDP secured more than six years of operating and capital expenditure. While the liquidity ratios might seem stressed at first glance, the company holds $147 million in cash and marketable securities, weighed against $70 – $90 million in operating cash outflow projections for the remaining three quarters of 2024.
Additionally, SLDP has $232 million in investments, which, while held for the long term, can be easily liquidated if necessary.
SLDP’s unique capital-light model focuses on licensing its technology, with sulphide electrolyte powder as its only planned product. This approach avoids the costs and complexities of manufacturing battery cells, further bolstering its financial position.
Partnership with BMW
BMW is building a new solid-state battery (SSB) facility that leverages SLDP’s technology in Germany. It is possible that Sample B will be manufactured there, but the exact arrangement is yet to be determined.
Regardless, SLDP has the ability to manufacture Sample B on its SP-1 facility, which has been fitted with commercial-scale battery cell manufacturing equipment that simulates a large-scale production line.
The primary focus right now is ramping up electrolyte sulphide powder production in the SP2 facility to meet expected demand. Most of the expansion construction projects are expected to be completed this year, so lower capex spending should start in 2025.
SLDP is also collaborating with SK ON to build a manufacturing facility in South Korea, indicating further expansion and investment through 2025.
Market Challenges
The price of the most commonly used battery chemistries has declined significantly in the past 18 months due to over-production and softening in EV growth, intensifying competition among suppliers. Although SLDP’s solid-state battery (SSB) cells offer advantages in energy density, safety, and longevity, the extent to which these benefits can outweigh cost considerations will determine future demand.
Sample B and Sample C will be critical to assess the economic feasibility of producing SLDP’s cells on a commercial scale.
Potential High Reward in SLDP Stock
There are inherent risks associated with investing in a development-stage company like SLDP. However, its current undervaluation relative to its assets and potential suggests a potential upside for investors willing to embrace a longer-term perspective and tolerate potential losses.
The company’s upcoming milestones and the publicity around the anticipated BMW demo car, the first EV running an SSB, could serve as a catalyst for the stock.
Investors should closely monitor SLDP’s progress, particularly its partnership with BMW and the development of Sample B and C cells. The potential for significant advancements in solid-state battery technology could provide substantial returns for those willing to take on the associated risks.
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I’m Jackson Hartwell, a writer who specializes in dissecting current business events. I’m dedicated to providing you with clear and concise insights into the world of politics, making it easier to understand the latest news and developments.
