Bronte Capital's John Hempton has a post about what a crummy investment the battery company A123 has been for him:
we lost money because the company just can't get manufacturing costs low enough fast enough to produce the rosy future we saw. We assumed away execution risk and paid the price.
A123 might get there in the end – and the stock is almost certainly a better buy now than when we purchased it – in that they are further developed and the stock is half the price. But we are hardly in a position to judge whether they will execute in the end. And we are already seeing competitive products in development.
At least he acknowledges his investment was a mistake, which is more than can be said for the government agencies that have poured capital into the company. From a New York Times blog item reporting the company had opened a factory in Michigan:
A123 Systems, an electric car battery supplier to Fisker Automotive and BMW, among other companies, opened its new 291,000-square-foot lithium-ion battery plant in Livonia, Mich., on Monday, financed in part by a $249 million federal stimulus grant from the Energy Department....A123's federal grant last year was complemented by $125 million in state incentives....A123 is based in Massachusetts, and Mr. Vieau said the state extended a $5 million loan earlier this year to expand the company's research activities.
Why should I or an ordinary Massachusetts or Michigan taxpayer be taxed to subsidize batteries for BMW buyers or to prop up the value a company held be investors in Mr. Hempton's hedge fund? It's a reverse Robin-Hood. Mr. Hempton's post doesn't get into the government subsidy issue, but it's part of the story.