Altair Nanotechnologies Completes $40M Private Placement with UAE Commercial Group
30 November 2007
Altair Nanotechnologies Inc., provider of advanced nanomaterial-based products and technology for a range of applications including lithium-ion batteries for transportation, has completed a $40 million private placement of its common stock to Al Yousuf LLC.
Al Yousuf LLC was founded in Dubai in 1953 and since that time has steadily grown to become one of the leading commercial groups in the United Arab Emirates. Al Yousuf operates in a wide range of industries including automobiles, marine, manufacturing, real estate, information and communication technology, electronic goods and chemicals.
We see the tremendous global growth opportunity for Altairnano’s innovative battery technology in both the transportation and stationary power markets. Given our transportation expertise, we believe these markets are ready for Altairnano’s clean, powerful and scaleable energy storage systems.
—Iqbal Al Yousuf, President of Al Yousuf LLC
Under the purchase agreement, Altairnano has agreed to issue an aggregate of 11,428,572 shares of common stock to Al Yousuf LLC at a purchase price of $3.50 per share. The shares will be contractually restricted from resale for at least two years, with one-third of the shares being released from this restriction on the second, third and fourth anniversaries respectively.
The funding is intended to support manufacturing growth, working capital and general corporate purposes as we expand the production of our advanced power and energy storage products. The strategic investment partnership with Al Yousuf allows us to continue to have an impact on the dynamics of the transportation and stationary power markets.
—Alan J. Gotcher, Altairnano President and CEO
J.P. Morgan Securities Inc. acted as the exclusive agent in the private placement. The share purchase is set to close in stages, with a closing for $10 million in shares having occurred on November 30, 2007 and a closing for the remaining shares scheduled to occur on December 10, 2007. Altairnano agreed to register the resale of the shares prior to the expiration of the two-year lockup period and granted the investor the right to demand a subsequent underwritten re-sale registration.
If this is what it takes for ALTI to succeed then OK. But why does Al Yousuf get to buy shares for $3.50 when right now the stock trades at $4.20/share? ALTI must be pretty desperate to get some cash.
We just had a financial bubble (housing), but Americans spent all the money, some on a war but most of it on SUVs, vacations, boats, etc. We aren't saving enough to fund our own investment in next-generation technologies to get us off of oil. Ironically it's an oil producer that has the cash and is willing to fund the R&D.
Posted by: JamesEE | 30 November 2007 at 08:09 AM
What I don't understand is why a foreign fund, partially controlled by a foreign government is able to obtain substantial control of the company for their 40 million investment while the US government who continually provides funding to this company does not demand or get similar renumeration. This investment will give this foreign government, a major oil producer, approximately 15% of the common stock of this company for their investment.
The US government recently provided over 7 million in funds and received no ownership in return. It is time the government starts to change its handling of grants.
Furthermore, the funding is coming from the Defense budget which would indicate substantial national security interests. Should potential foreign control be allowed?
Posted by: Mungai | 30 November 2007 at 09:26 AM
I own some Altairnano. It looks like a fair deal to me.
The discount is about 20% at $3.50 per share. This is reasonable for a block trade of that size. Remember they can't sell any shares for two full years and most for longer.
Two years will probably sort out the winners and losers in the lithium ion battles. So there is a risk to the buyer and a large potential return for taking the risk.
It isn't clear if J.P. Morgan's fee will come out of the $3.50 or the buyer will pay it. At 20% discount to Altair I would guess that the buyer will pay it.
Posted by: K | 30 November 2007 at 11:51 AM
Something doesn't smell right. Next thing you know the Emirates are going to buy Sand!
Posted by: DS | 30 November 2007 at 02:13 PM
JamesEE:
When many million new shares are issued/sold you dilute the value of all shares. A post-diluted price of $3.50 instead of a pre-diluted price of $4.20 is reasonable.
Americans had a choice. Pour $$$$ billions in useless wars or invest in local industries. Making wars was selected, so others will invest in USA industries.
Another very bad choice was to drive 100+ million gas guzzlers and spend $$$$ billions on imported oil thus creating a few hundred + new foreign billionnaires.
And so on...... the list could be very long.
Mungai:
Even if it makes a lot of sense, for local governments to invest in their own private enterprises is considered to be anti-democratic and anti-free enterprise. However, it seems that foreign governments can do it without much limits.
It's an odd world.
Posted by: Harvey D | 01 December 2007 at 09:00 AM
Harvey D: Your remark about dilution was quite clear. I was thinking of block trade factors that justified a $3.50 price.
You are correct, a block trade discount and a new issue are different.
In the US governments do invest in their own private enterprises. We often don't notice it.
It is done with convention centers, arenas, sweetheart deals for developers, ownership of utilities and airports, etc.
In Phoenix I believe the city actually built hotels downtown that profit from convention business. Many schools and universities do the same thing with various spinoff companies - usually scientific - and endowment investments.
The big schools also own student apartments, have private schools for the employees children, and own hospitals. They often invest in area improvements thought to enhance the school.
The big difference is that such US investments are actually for the benefit of public employees not stockholders. They get jobs. And some are quite lucrative.
Any profit goes to the government or is split with private partners. Any loss is billed to those taxed.
Posted by: K | 01 December 2007 at 11:10 AM
Harvey, a stock issuance is not dilutive in the way you describe unless the company basically gives the shares away for free.
Solid companies issue shares at market price, but ALTI burns about $20m per year and was due to run out of cash around May 2008. Under those conditions a 20% discount for such a large placement is not bad at all.
K, Altair will pay JPM's fee of 2.4m plus expenses out of the $40m. Net proceeds to ALTI will be around $37m.
Posted by: doggydogworld | 01 December 2007 at 11:17 AM
"Americans had a choice. Pour $$$$ billions in useless wars or invest in local industries. Making wars was selected, so others will invest in USA industries." Right harv. Devil spawn hastens inevitable demise of the earth. Good riddance.
Posted by: Sulleny | 01 December 2007 at 11:18 AM
K:
What I meant by governments investing in their own industries was not the usual give aways but effectively buying common shares in order to share future profits.
It could be called Investment USA. The intial start up capital could be between $100 and $500 billions.
Investment USA would invest mostly in promising start up companies such as Altair ++++ to get new products to the market faster, create jobs, reduce imports and increase exports.
Once a new company is well established and making profits, Investment USA could pull out (with a profit) and use the resources to help other start ups.
The same initial $500 billions would be recycled over and over again.
Posted by: Harvey D | 01 December 2007 at 01:09 PM
Harvey -- if government owns part of a company it will favor policies which help that company at the expense of competitors. This can be a recipe for disaster when government invests in the wrong company, as it tends to do most of the time.
Besides, government essentially owns one third of US companies via the corporate income tax. Look at the big corporations, they pay nearly as much (sometimes more) in "dividends" to the federal government than they do to shareholders who ostensibly own the company.
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