Solid Power is a promising battery technology company set to go public through the merger of a special purpose acquisition company with Decarbonization Plus Acquisition III (NASDAQ: DCRC). And while the company can be a big winner for investors if it can deliver on its vision, it’s far from a certainty at this point. In this fool live Video clip, recorded on October 18, Fool.com contributors John Rosevear and Danny Vena discuss what investors should keep in mind before adding Solid Power to their portfolio.
Danny Vena: John, let me ask you. It almost sounds, forgive my ignorance, but it almost seems like it’s pretty close to the obvious. Am I reading poorly? Looks like they have a huge addressable market, they have customers lined up, the technology is almost ready for prime time, and the valuation is way below the market cap of the company, am I reading it right? ?
John Rosevear: I think so. The only catch, of course, is that a lot of other bands are working on this technology and some of those bands have names like Toyota, which leads its own efforts. It is believed that they are taking a similar path to Solid Power, at some point solid-state electric vehicle batteries will be a commodity in 10 years, probably 15 years.
But that’s who can get a significant chunk of that $ 220 billion early on and with Solid Power, given that it’s close to Ford and BMW, both are going on, as most of the former auto Americans who are expanding their plans to electric vehicles give them an edge there. When you look at who is allied with whom in this industry, Ford and BMW are probably going to come up with huge volumes of EVS a bit later than some of the other entrants. This isn’t necessarily a downside for various reasons for them, but it does mean that Solid Power’s total addressable market might represent a smaller portion of that $ 220 billion than maybe some rivals in the near term.
On the other hand, yeah, that sounds pretty good to me, I can tell you I haven’t met or spoken to the senior executives at Solid Power, but I’ve spoken to some folks at Ford who are working with them and they speak very well about the business and that is a big endorsement for me. I think this is a really intriguing investment for any battery technology, because the technology moves so slowly and because there are all kinds of potential issues getting to scale, these are investments that should be made. taking into account the risk.
One of the advantages of Solid Power is that they don’t need to spend billions and billions of dollars to build factories. Because their batteries can be built on production lines similar to those used for lithium-ion batteries so that they can come out relatively quickly, that’s another plus. QuantumScape going to have to build factories and these factories could be expensive to scale to supply a customer like Volkswagen.
Emerging technology, it may take a while to emerge. Here is an actor who has good partnerships, a very promising technology. Their claims have all been verified so far, they could be in production in 15 months, in 16 months, and supply batteries to Ford and BMW, neither of which are small companies. The valuation looks pretty modest compared to the only big comp we see in the market which is now public. So yes, that’s my opinion.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.