Yesterday, shares of clean energy battery startup Freyr Battery (FREY) rumbled 12.01% on news that the company would sell 20 million new shares to raise capital for its planned battery factories in Norway and (newly announced) Georgia.
Today, December 2, traders and investors have done a bit of rethinking and bid the stock up 3.91% as of the close.
When a company sells new shares, it dilutes the stake of existing shareholders. So some pullback on the news of a 20 million share offering is understandable. 20 million new shares is a lot for a company with just 116 million shares outstanding before the offer.
But in another market, I would have expected investors in Freyr to realize that they own shares of a company that is just beginning to build out its battery manufacturing capacity and that raising capital to invest in new factories is a good thing.
If the capital can be raised at a reasonable price.
Freyr priced its offer at $11.50, below the $12.40 share price yesterday. That’s pretty good in this market where raising capital at all for a startup stage company has become difficult. Freyr was also able to increase the size of the offering from an initial 13.5 million shares to 20 million. That’s a sign of investor interest and bodes well for future capital raises. The offering raised $230 million.
And I’m sure it won’t be the last sale of shares. In announcing its Georgia battery factory Freyr said that the initial phase, with capacity of 34 gigawatt-hours in production, would require a capital investment of about $1.7 billion. (Not all this capital will come from the sale of new shares. Some will come from joint venture deals, like the one Freyr signed in October with Koch Strategic Platforms, one of the units of Koch Investment Group, the investment arm of Koch Industries.)
And as long as I’m on the subject of the proposed Georgia Giga factory, I’d note that Freyr has said that it has begun discussions with Georgia utilities on solar storage capacity in order to use solar-generated electricity to power the plant. Which would seem to me to be necessary for a company that bills itself as a clean energy battery producer (and that will run its Norway factory on hydropower.)
Freyr is a member of my Jubak Picks Portfolio. Since the initiation of that position on October 5, 2022, the shares are down 22.15%.
Full disclosure: I own shares of Freyr Battery in my personal portfolio. I will be buying (modestly) more shares on the recent weakness.
