Solid Power is a company that went public through a SPAC deal to raise capital for its cutting-edge product: the solid-state battery. This technology promises to be the most advanced battery on the market, offering much faster charging speeds and enhanced safety, eliminating risks like thermal runaway that can cause lithium-ion batteries to explode.
Additionally, solid-state batteries are projected to be more cost-effective and have a longer life cycle. However, like many SPAC ventures, the success of Solid Power hinges on its ability to execute these promises and sustain operations long enough to achieve mass production.
With the company’s share price having plummeted over 80% from its SPAC price of $10, it presents a speculative investment opportunity. If successful, the rewards could significantly outweigh the risks.
Financial Overview
In the most recent 10-Q filing for 2024, Solid Power reported a 57% year-over-year increase in revenue, primarily from joint development agreements (JDAs) with BMW, Ford, and SK On, alongside some government contracts.
Despite a 32% year-over-year decrease in direct costs, due to the completion of JDA milestones, these costs are expected to rise again as the company continues to fulfill its agreements.
Research and development expenses will continue to grow, reflecting the company’s aggressive phase of development and expansion to meet agreements and bring its product to market. Solid Power remains in the early stages of product development, requiring substantial capital to operate.
Solid Power’s Cash on Hand
As of the latest quarter, Solid Power had approximately $146 million in cash and marketable securities, along with an additional $232 million in long-term investments, and no debt. This financial position provides flexibility for the company to invest in R&D and product development. Management has indicated that the company will experience a lower cash burn over the coming quarters, aiding in its longevity.
For the full year, Solid Power projects revenues between $20 million and $25 million from JDA agreement milestones, representing a year-over-year increase of around 30% at the midpoint. The company’s ability to meet its milestone agreements with major partners like BMW, SK On, and Ford is crucial to its short-term stability.
Future Outlook
Solid Power’s proposed product offers significant advantages: dramatically improved charging times, reduced costs (15% to 30% cheaper than competitors), enhanced safety, and longer battery life.
However, as with many SPAC ventures, the promises are ambitious, and the company’s success depends on its execution.
Solid Power differentiates itself from other SPAC ventures by securing backing from prominent OEMs, including BMW, Ford, and SK On. These partnerships lend credibility and potential to Solid Power’s vision of revolutionizing EV battery technology.
However, there is still a considerable journey ahead. The transition to mass production is challenging, and the optimistic projections made during the SPAC deal may face delays and obstacles.
A pertinent example of such challenges is FREYR Batteries (FREY), which went public with promises of building its first gigafactory by 2023 and additional factories by 2028.
However, the company has yet to complete any promised factories and continues to burn cash, lagging behind its schedule. Similarly, Solid Power faces the risk of overpromising and under-delivering, which could jeopardize its partnerships and financial stability.
Competitors
The solid-state battery field is becoming increasingly crowded, with numerous players investing in research and development. QuantumScape (QS) is one of Solid Power’s main competitors, with both companies striving to eliminate the range anxiety associated with current battery technology and capture market share from lithium-ion batteries.
Another significant competitor, ProLogium, recently signed a contract with France to begin mass production of their solid-state technology by 2027. This Taiwanese company, founded in 2006, has substantial expertise and is a formidable contender.
However, even if ProLogium achieves mass production first, Solid Power and QuantumScape could still compete effectively if their products prove to be more cost-efficient and superior in performance.
Lithium-ion batteries, currently dominating the market, continue to see cost reductions. China, led by Contemporary Amperex Technology (CATL), is the leader in lithium-ion production.
While some, like Tesla’s Elon Musk, argue that lithium-ion technology has further potential and that solid-state batteries are unnecessary, the growing interest and investment in solid-state technology suggest a competitive future.
Investment Considerations
Investing in Solid Power requires careful consideration of the risks and potential rewards. At around $1.80 per share, the company is more attractive now than at its SPAC price of $10. While there is a risk of further decline, the potential upside is substantial if Solid Power can successfully bring its product to market.
However, there are safer investment options with less risk over the next few years. For those willing to take on the speculative risk and keep the position size manageable, Solid Power could offer a high-reward opportunity if the company achieves its technological and production milestones. The backing from major OEMs adds a layer of confidence, but the path to success is fraught with challenges.
Solid Power: Intriguing Opportunity
Solid Power has a promising product with significant potential to revolutionize the EV battery market. The company’s strong financial position, high-profile partnerships, and innovative technology provide a solid foundation. However, the speculative nature of SPAC ventures and the competitive landscape present substantial risks.
For investors willing to take on these risks, Solid Power offers an intriguing opportunity. With careful monitoring and a small, speculative position, investors could potentially benefit from the company’s success in the coming years.
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I’m Nathan Goldstein, a writer and political analyst focused on simplifying complex social and political issues. My writing breaks down the intricacies of today’s society and politics to make them more understandable for you. I’m committed to providing clear and well-informed insights.
