Solid Power Is an Extremely Risky Wager on Unique EV Batteries
Not long ago – Dec. 9, 2021, to be precise – Solid Power (NASDAQ:SLDP) debuted on the Nasdaq exchange after the company completed its SPAC (special purpose acquisition company) merger with Decarbonization Plus Acquisition Corp. III. As a result, Wall Street can say good-bye to DCRC stock and hello to SLDP stock.
Thus, we have another electric vehicle (EV) SPAC stock. Informed investors should wonder: what makes this one different from all the rest?
First of all, Solid Power doesn’t sell electric cars or trucks. Rather, the company provides batteries for these EVs – and these aren’t just the same old lithium-ion batteries you’ve probably seen before.
On the other hand, Solid Power’s financials aren’t ideal. Therefore, when considering this company as a prospective investor, you’ll have to weigh your own risk tolerance against your enthusiasm for EV batteries with unique properties.
A Closer Look at SLDP Stock
InvestorPlace contributor Eddie Pan did an outstanding job of covering the Dec. 9, 2021, debut of SLDP stock. So, don’t hesitate to read that article (and then come back to this one, of course).
The stock traded at around $14 on that first day, but it didn’t stay there for long. Unfortunately for early investors, the share price tumbled during the next several weeks.
As of Jan. 6, 2022, SLDP stock had already fallen to $8. Some folks consider it a bad sign when a SPAC stock declines below the typical pre-merger-announcement price of $10.
Yet, prospective investors can choose to view the glass as half-empty or as half-full. Just maybe, there’s a rare bargain here – but that depends on whether you like Solid Power’s business model, so let’s delve into that right now.
Building a Better Battery
As the company’s name suggests, Solid Power develops and sells solid-state EV batteries. Since they don’t contain liquid electrolytes, the risk of fire or explosion should decrease, at least in theory.
Pan observed that solid-state batteries are typically costlier than lithium-ion batteries. Hopefully, solid-state EV battery prices will go down over time with the emergence of technological advancements.
If you’re interested in the science behind the company’s innovative battery tech, Solid Power offers an explanation.
“Solid Power replaces the flammable liquid electrolyte contained within a conventional lithium-ion battery with a proprietary sulfide solid electrolyte,” the company clarifies.
The result, according to the company, is a battery that’s designed to be safer, more stable at high temperatures and able to provide higher energy at a reduced cost.
This could prove to be a very lucrative opportunity. Indeed, Solid Power envisions a $305 billion total addressable market by the year 2035 for its batteries.
Not on Solid Ground
So now, you have the lowdown on what separates Solid Power from its competitors in the EV battery manufacturing industry.
Before you pour your hard-earned capital into this intriguing start-up, though, it’s important to check the company’s fiscal stats.
A recently filed Securities and Exchange Commission (SEC) Form 10-Q reveals that Solid Power had no cash as of Sept. 30, 2021. That’s probably not what sensible investors would like to hear, I’ll admit.
Moreover, Solid Power incurred operating expenses totaling nearly $3 million during the three months ending on Sept. 30, and totaling slightly more than $5 million from Jan. 29 to Sept. 30, 2021.
But wait, it only gets worse from there. As it turns out, Solid Power incurred a net earnings loss of $18,413,179 from Jan. 29 to Sept. 30, 2021. Also, no revenues were mentioned in this SEC form.
The Bottom Line
In order to appreciate Solid Power’s value proposition, you’ll need to envision a future in which solid-state EV batteries prevail.
That future isn’t guaranteed, so SLDP stock is risky. It could go to zero, or it could make a 10x move to the upside – the sky’s the limit, really.
Hence, a small position in the stock is perfectly fine. Just be aware that, while the company’s battery technology is certainly interesting, Solid Power still needs to prove its viability from a financial standpoint.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
