Axion Power International: Buy? Sell? Hold?
A reader with a long position on Axion Power (AXPW) asked for my opinion. He notes from their 2012 10-K: “Our PbC energy storage device is a hybrid battery supercapacitor that combines the simplicity of lead-acid batteries with the faster recharge rate, longer cycle life and greater charge acceptance of supercapacitors.” Also, readily recyclable at end of life.
As it turns out, my friend and frequent 2GreenEnergy commenter Tom Konrad has written about Axion Power up one side and down the other. Per his most recent post on his website AltEnergyStocks.com, he’s bearish on their stock because “of the recent private investment in public equity (PIPE) convertible note financing. This is an unconventional convertible financing, because the conversion price of the notes falls with the market price.”
A bit over my head, but in essence, he likes the company on the merits of its business but thinks that they’ve backed themselves into a corner as far as their stock is concerned. Once a stock in this position starts to fall, it has a tendency to continue to do so. He advises people to sell at $0.17, but it closed at $0.13 today — so maybe he’s a “hold?” I don’t know; you could contact him via his website.
For what it’s worth, I’ve seen a lot of this type of stuff recently with microcap stocks in clean energy. In essence, the company and its stock become two different entities, and management focuses more on pumping the value of the stock, while losing sight of the business. This, of course, is a gross oversimplification, and it may be totally inapplicable to the case at hand. But this, in my opinion, is why reverse mergers into publicly traded shells and other similar shenanigans almost never work.
Coincidentally, I have two friends going through this exact scene right now, both CEOs of extremely small, promising, but pre-earnings companies. I warned both of them not to go in this direction, but neither heeded my advice.
Thanks for this post Craig. As the one who asked for your opinion I appreciate your quick and thoughtful response. Tom Konrad’s articles are also thoughtful, well written and his concerns about the PIPE (private investment in public equity) valid.
I believe strongly that the Axion’s proprietary technology is a real game changer for transportation and other alternative energy applications and believe the technology will be in wide use within the next few years. That said, it is far from clear whether the current Axion shareholders will be the ones to benefit even if I am correct.
The Seeking Alpha Axion Power Concentrator is a hotbed of discussion of all things Axion and related alternative energy topics. Negative critique of CEO Thomas Granville is common on the site and the share price plummet of the past few years makes it hard to argue. I however believe that Mr. Granville is the right man for the job as a committed, able, and sincere leader and as the one who has been at the helm from the beginning.
That said, this is a absolutely a speculative investment and every penny I have in the stock is money I can afford to lose if it fails.
Following is a link to a transcript of today’s conference call conducted by Mr. Granville:
http://seekingalpha.com/article/1638932-axion-power-internationals-ceo-discusses-q2-2013-results-earnings-call-transcript
This is a link to the latest Seeking Alpha Axion Power Concentrator:
http://seekingalpha.com/instablog/1631091-axion-power-host/2131232-axion-power-concentrator-260-august-15-10q-filing-for-q2-two-axion-forbes-articles-john-petersen-on-pipe-mechanics-incentives
Thanks again for this post,
geopark
Happy to help. I can’t comment on Granville; I don’t have an opinion.
Btw, I don’t use people’s names unless I’m 99+% confident that they wouldn’t object.
I’m still a sell. As long as new shares are being issued under the PIPE, stock declines will lead to further stock declines – the PIPE removes any theoretical “bottom” on the stock price.
The only thing that might change this dynamic would be a business development which could lead to a big increase in cash flow this year or early next year. Until we see such an announcement, I’m a sell at *any* price. But such an announcement could turn me into a “buy” in about the amount of time it would take me to read it.
Wow, that “PIPE” deal is deadly. Why do people make that choice?
Axion was between a rock and a hard place… they had to get funding or go bankrupt, and this was the best deal on the table. If they can bring cash in the door soon, they have the option to pay in cash instead of shares, in which case the stock should appreciate rapidly. And not everyone thinks the deal is as bad as I do; see John Petersen’s article here: http://seekingalpha.com/article/1576442-understanding-the-mechanics-and-incentives-in-axion-powers-pipe
I see John’s logic, but I believe he is over-analyzing. I personally think the PIPE investors will just take their money and run, rather than following the strategy he outlines which might allow them to achieve greater profits (but at somewhat greater risk.)