Yes, buy, kids, buy. Just find out how it will compete with VW’s solid-state batteries, which VW promises to run en masse, or with Musk's created batteries. There is always a risk. It is clear that batteries produced in China using polluting coal-fired energy are ecologically and geopolitically risky.
"The battery business is poised to grow in the 21st century as oil did in the 20th: fast and geopolitical. Freyr Battery is on the right side of both trends.
The Norwegian startup was founded in 2018 and taken public last month by a U.S. special-purpose acquisition company. The deal raised $890 million to fund the construction of "gigafactories" in Mo i Rana, a town in Norway that grew up alongside the iron and steel industry due to a local abundance of hydroelectric power.
That cheap and green source of electricity is now at the heart of Freyr's business plan to become one of the largest suppliers of lithium-ion batteries in Europe. In 2025, it thinks it will have a cost advantage over every other producer globally as a result of its access to cheap power, its targeted scale and a new battery technology. The pitch shares elements with that of Swedish battery darling Northvolt, which is privately owned by Volkswagen Group, Goldman Sachs Asset Management and others.
With plans to increase electric-vehicle sales exponentially in the coming years, car makers need all the batteries they can get, and at the lowest possible price. Increasingly, they also want them sourced close to home, moved partly by politicians worried about manufacturing jobs and China's dominance of the battery business. The environmental friendliness of batteries is yet another mounting concern. Freyr ticks all these boxes, notes Vance Brown, a portfolio manager at Williams Jones Wealth Management who recently bought the stock.
The difference with Northvolt is that Freyr doesn't have its own technology. Instead it is relying on a Cambridge, Mass., battery startup called 24M that was spun out of the Massachusetts Institute of Technology in 2010.
Freyr, having identified the growth potential of lithium-ion batteries and the production opportunity in Norway, wanted to launch faster than developing its own cutting-edge technology would allow. Following an 18-month beauty contest, it opted for a licensing deal with 24M in December. The company's novel technology should cut plant and production costs relative to industry benchmarks.
The approach means Freyr isn't an intellectual-property play like some other battery startups, but an investment in an industrial rollout. That caps the upside but also reduces risk. While shareholders are exposed to Freyr's bet on 24M's technology, they aren't being asked to fork out for intangible battery assets that, in a fast-evolving industry, face an uncertain future. The SPAC merger valued the company at $544 million -- a modest 0.8 times the earnings before interest, taxes, depreciation and amortization projected in its business plan for 2025.
Freyr is a rarity as a listed battery manufacturer that doesn't come from East Asia. If its strategic potential in a big growth market isn't enough to attract attention over the coming months, a splashy U.S. deal could help. The company is in talks with an unnamed "multinational industrial conglomerate" about forming a U.S. joint venture to make batteries somewhere that offers plenty of cheap renewable energy.
The shares have found a little momentum in recent days due to a bullish Morgan Stanley note and President Biden's electric-vehicle push, but they are still somewhat below the radar at $13.23, compared with the SPAC's $10 par price. That might not last." [1]
1. A Bet on Green and Geopolitical Batteries
Wilmot, Stephen. Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 11 Aug 2021: B.12.
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