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John Petersen
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John Petersen is the executive vice president and chief financial officer of ePower Engine Systems, Inc., a Kentucky-based enterprise that has developed, built and demonstrated an engine-dominant diesel-electric hybrid drivetrain for long-haul heavy trucks that promises fuel savings of 25 to 35... More
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Fefer Petersen & Co.
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  • Axion Power, An Alternative View Of Dilution
    Yesterday Axion Power International (OTCQB:AXPW) announced a direct registered offering of 28,571,429 common shares at a price of $0.35 per share. The price fell to a low of $0.38 before recovering to $0.47 by the close. Once again the dilution bogeyman raised his ugly head and once again the reaction was overblown.

    There are basically two ways people can account for dilution.

    New investors who pay more per share than the company's tangible book value per share suffer the classic dilution discussed in every prospectus. Axion's prospectus disclosed the dilution to new investors as follows:

    Offering price $0.35
    Book value at September 30th$0.155 
    Increase in book value from offering$0.040 
    Pro forma book value after offering $0.195
    Dilution in book value to new Investors $0.155

    Existing stockholders also argue that their proportional interest in the enterprise has been reduced so their shares are worth less. While I've always preferred the bartenders approach that one can't dilute a beer by adding a shot of whiskey, I'm going to take a look at the issue from the other side and show why the reaction was overblown.

    On Tuesday afternoon Axion's stock closed at $0.62, which gave the company a market capitalization of $53.0 million based on 85.5 million outstanding shares. The offering injected $9.25 million of hard net cash into the company and resulted in the issuance of 29.4 million shares, including about a million shares that will be issued to brokers as compensation. From the perspective of an existing stockholder the following calculation is a worst case presentation.

     SharesPriceMkt Cap
    Market capitalization before offering85.5$0.62$53.02
    New shares issued in offering29.4 $9.25
    Market capitalization after offering114.9$0.54$62.27

    I think the second calculation is overly simplistic because in corporate finance the whole is always worth more than the sum of its parts. But even that simplistic analysis says that if Tuesday's price of $0.62 was fair and reasonable, the price after the offering should not have fallen below $0.54.

    Disclosure: I am long OTCQB:AXPW.

    Tags: AXPW, Dilution
    Feb 02 12:59 AM | Link | 28 Comments
  • The Chinese Approach to Grid Storage
    One of the many organizations that sends me solicitation e-mails is the China Energy Storage Alliance. This morning I got an e-mail from them that shows how the sensible Chinese are approaching the issue of grid-based energy storage.

    As part of a national push to integrate renewables into the power grid, the Chinese Ministry of Science and Technology has launched "The National Wind & Solar Renewable Integration Energy Storage Demonstration Project" that will have:
    • 300-500 MW of wind generation;
    • 100 MW of PV generation; and
    • 110 MW of energy storage.
    During the first stage, the Ministry of Science and Technology will install and integrate:
    • 100 MW of wind;
    • 40 MW of solar; and
    • 20 MW of energy storage.
    The most fascinating aspect of the storage component is that instead of picking a winner for the first 20 MW of storage,  Ministry of Science and Technology will break it down into six different systems from six different suppliers as follows:

    When the first round of testing is done, they'll decide how to build out the other 90 MW of needed storage.

    Imagine that! A government agency that thinks real world testing of competitive products and technologies is important.

    Jan 09 11:57 AM | Link | 18 Comments
  • Why Supply And Demand Inflections Are Different
    For several months I've been writing about supply and demand inflection points like the one that started last week in Axion Power International (OTCQB:AXPW). While many Seeking Alpha readers are familiar with the technical behavior of news driven price spikes, there are very few students of supply and demand inflections because they're rare. I'm intimately familiar with supply and demand market dynamics because my work over the years has included several reverse merger transactions and that's where supply and demand inflections occur most often.

    Since this is an important topic, I went to extreme lengths and bought historical trading data for Boots & Coots International Well Control, a reverse merger that I worked on in the summer of 1997 and know intimately. Boots & Coots was a textbook example of how supply and demand inflections develop. The nice thing about the Boots & Coots transaction is that it had four clear supply and demand inflections between August 1, 1997 and December 31, 1998. Here's the 19 month high, low, close price chart.

    The first supply and demand inflection began in mid-September when the market had absorbed two-thirds of the free trading shares held by former shareholders of the public shell. The inflection ended on November 1st when restricted shares held by former officers and directors of the shell became free trading. Here's the two month chart.

    The second supply and demand inflection began in January 1998 when the market had absorbed about two-thirds of the shares held by former officers and directors of the shell. It was a sharper spike that was quickly alleviated when the company eased resale restrictions on shares that had been issued to consultants and others in connection with the reverse merger. Here's the chart.

    The third supply and demand inflection started in April 1998 when the market had absorbed about two-thirds of the consulting shares and the price reached a level where the early open market buyers started taking profits. Here's the chart.

    The fourth supply and demand inflection started in August 1998 when shares held by pre-merger investors in the firefighting company became eligible for resale and the company reported disappointing Q-2 earnings. Here's the chart.

    The important takeaway from these charts is that supply and demand inflections take longer to develop than news driven price spikes and traditional technical analysis of resistance and support levels won't typically give you an accurate view of what's driving the price.
    Tags: AXPW
    Jan 07 11:47 AM | Link | 16 Comments
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